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Fall-2013
Master of
Business Administration - MBA Semester 4
MF0015–International
Financial Management-4 Credits
(Book ID: B1759)
Assignment
(60 Marks)
Note: Answers
for 10 marks questions should be approximately of 400 words. Each question is
followed by evaluation scheme. Each Question carries 10 marks 6 X 10=60.
Q1. Explain the goals of
international financial management. Give complete explanation on Gold Standard
1876-1913. List down the advantages and disadvantages of Gold Standard.
Answer. International Financial
Management also
known as International Finance is a popular concept which means management of
finance in an international business environment, it implies, doing of trade
and making money through the exchange of foreign currency. A company's most
important goal is to make money and
keep it. Profit-margin ratios are one way to measure how much money a company
squeezes from its total revenue or total sales.
Q2. Give an introduction on capital
account with its sub-categories. Discuss about capital account convertibility.
Answer. A national account that shows the net
change in asset ownership for a nation. The capital account is the net result
of public and private international investments flowing in and out of a
country. May also refer to an account showing the net worth of a business at a
specific point in time. The Capital
Account (also known as financial account) is one of two primary components
of the balance of payments, the other being the current account. Whereas the
current account reflects a nation's net income, the capital account reflects
net change in ownership of national
Q3. Explain the concept of Swap.
Write down its features and various types of interest rate swap.
Answer. In finance, a swap is a derivative in which counterparties exchange cash flows of
one party's financial instrument for those of the other party's financial
instrument. The benefits in question depend on the type of financial
instruments involved. For example, in the case of a swap involving two bonds,
the benefits in question can be the periodic interest (coupon) payments
associated with such bonds.
Q4. Elaborate on measuring exchange
rate movements. Explain the factors that influence exchange rates.
Answer. After defining the types of exchange rate risk that a firm is
exposed to, a crucial aspect of a firm’s exchange rate risk management
decisions is the measurement of these risks. Measuring currency risk may prove
difficult, at least with regards to translation and economic risk.
At present, a
widely-used method is the value-at-risk (VaR) model. Broadly, value at risk is
defined as the maximum loss for a given exposure over a given time horizon with
z% confidence.
Q5. Write short notes on:
(a) International Credit Markets
(b) International Bond Markets.
Answer. (a) 'Credit Market'
1. The broad
market for companies looking to raise funds through debt issuance. The credit
market encompasses investment-grade bonds and junk bonds, as well as short-term
commercial paper.
2. The
market for debt offerings as seen by investors of bonds, notes and securitized
obligations such as mortgage pools and collateralized debt obligations (CDOs).
Q6. Country risk is the risk of
investing in a country, where a change in the business environment adversely
affects the profit or the value of the assets in a specific country. Explain
the country risk factors and assessment of risk factors.
Answer. Many investors choose to place a
portion of their portfolios in foreign securities. This decision involves an
analysis of various mutual funds, exchange traded funds (ETFs), or stock and
bond offerings. However, investors often neglect an important first step in the
process of international investing. When done properly, the decision to invest
overseas begins with determining the riskiness of the investment climate in the
country under consideration. Country
risk refers to the economic
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