Master of Business Administration Semester IV MF0015 International Financial Management- 4 Credits (Book ID: B1316) Assignment Set- 1 (60

Marks)

Note: Each Question carries 10 marks. Answer all the questions. Q1. Because of its broad global environment, a number of disciplines (geography, history, political science, etc.) are useful to help explain the conduct of International Business. Elucidate with examples.

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Q2 . What is meant by BOP? How are capital account convertibility and current account convertibility different? What is the current scenario in India? Q3. What are the different types of foreign exchange transactions? Write the characteristics of euro currency market. Q5. 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 US interest rate 15% 90 day forward rate 0.2200 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? Hint: The interest differential between US and France is 5%. Yes, there is an incentive for CIA Profit $ 360. Winter / November 2011

Q6. Explain various methods of Capital budgeting of MNCs Master of Business Administration Semester IV MF0015 International Financial Management- 4 Credits (Book ID: B1316) Assignment Set- 2 (60 Marks)

Note: Each Question carries 10 marks. Answer all the questions. Q1. Define a futures contract. What are the different types of futures contracts? What are the advantages of using stock index futures?

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Q2. Distinguish between Eurobond and foreign bonds? What are the unique characteristics of Eurobond markets? Q3. Explain American depository receipt sponsored programme and unsponsored programme. Q4. Explain (a) Parallel Loans (b) Back to- Back loans Q5. Farm Products is the Canadian affiliate of a US manufacturing company. Its balance sheet, in thousands of Canadian dollars, for January 1, 1991 is shown below. The January 1, 1991, exchange rate was C$1.6/$.

Farm Products Balance Sheet (Thousands of C$) Assets Liabilities and Net Worth Cash C$1,00,000 Current C$ 60,000 Liabilities Accounts 2,20,000 Long-term debt 1,60,000 receivable Inventory 3,20,000 Capital Stock 6,20,000 Net plant and equipment 2,00,000 Total C$8,40,000 C$8,40,000