Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance International and Trade – I - Question Paper

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Note: Transit period is 25 days

Interest on post-shipment credit is 6% p.a.

Exchange margin needed is 0.3%

You are needed to calculate

(a) The exchange rate quoted to the company.

(b) The cash-inflow to the company.

(c) The interest amount to be recovered by the banker from the exporter.

(5 + two + two = nine marks) < ans >



END OF part B



part C : Applied Theory (20 Marks)

· This part consists of ques. with serial number seven - 8.

· ans all ques..

· Marks are indicated against every ques..

· Do not spend more than 25 -30 minutes on part C.



7. Based on their nature and function, L/Cs can be categorized into various kinds. discuss the different kinds of L/Cs, which are categorized on the basis of availability style.

(10 marks) < ans >

8. Write short notes on the following:

a. different methods of repatriation of export proceeds.

b. Preshipment Credit.

(5 + five = 10 marks) < ans >





END OF part C



END OF ques. PAPER






Suggested Answers
International Finance and Trade – I (221) : April 2006

part A : Basic Concepts

1.
ans : (a)

Reason: Statement (I) is accurate. If foreign inflation is higher than domestic inflation, then domestic residents will want to buy the relatively cheaper “domestic” goods, and therefore, they will decrease the demand for the foreign currency, which means reducing the supply of the domestic currency in the foreign exchange market.

Statement (II) is false, because an increase in foreign income will reason an increase in the demand for imports and therefore an increase in the demand for the currency of other nations. Statement (III) is false, because if foreign interest rates rise faster than domestic rates, then there would be an increase in the demand for foreign currency, which means the supply of domestic currency would rise in the foreign exchange market.
< TOP >

2.
ans : (e)

Reason: India’s terms of trade are two tons of wheat for one ton of rice. Indonesia’s terms of trade are the identical so no trade will take place. Therefore, there is no basis for trade. Hence choice (e) is stated to be the accurate ans.

Earning:   Approval pending.