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ASSIGNMENT Set 1
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Last Date to Submit the Assignment Set-1 at the respective LCs: - January 30 th , 2013
Master of Business Administration- MBA Semester 4 MF0015 International Financial Management- 4 Credits (Book ID: B1316) Assignment Set- 1 (60 Marks)
Note: Answer all questions (with 300 to 400 words each) must be written within 6-8 pages. Each Question carries 10 marks 6 X 10=60
Q1. What are the goals and functions of the World Bank, the IDA and the IFC? Q2. What is a credit transaction and a debit transaction? Which are the broad categories of international transactions classified as credits and as debits?
Q3. Write a note on exchange rate regime and foreign exchange market in India.
Q4. An American firm purchases $4,000 worth of perfume (FF 20,000) from a French firm. The American distributor must make the payment in 90 days in French francs. The following quotation and expectations exist for the FF. Present spot rate $ 0.2000 90 day forward rate 0.2200 US interest rate 15% French interest rate 10%
Your expectation of the SR 90 days hence 0.2400. (a) What is the premium or discount on the forward French francs? What is the interest differential between US and France? Is there an incentive for covered interest arbitrage? (b) If there is a CIA, how can an arbitrageur take advantage of the situation? Assume i) the arbitrageur is willing to borrow $4,000 or FF 20,000 and ii) there are no transaction costs. (c) If transaction costs are $50, would an opportunity still exist for CIA?
Q5. Define a futures contract. What are the different types of futures contracts? What are the advantages of using stock index futures?
Q6. Define Interest Rate Parity. What are the different types of IRP?