University of Delhi 2010-1st Year M.Com Commerce 2nd NTERNATIONAL FINANCIAL MANAGEMENT UNIVERSITY - Question Paper
Tuesday, 21 May 2013 06:10Web
Page 1 of 2
This question paper contains 16 punted pages!
Your Roll No
6472
M.ComTlI J
Course 434INTERNATIONAL FINANCIAL MANAGEMENT (Admissions of 2008 and before)
Time 3 Hours Maximum Marks 75
TEm : 3 : 75
(Write your Roll No on the top immediately on receipt of this question paper ) ftti WT W 37gnTRT I)
Note The maximum marks printed on the question paper are applicable for the candidates registered with the School of Open Learning These marks will, however, be scaled down proportionately m respect of the students of regular colleges, at the time of posting of awards for compilation of result
Note Answers may be written either m English or in Hindi, but the same medium should be used throughout the paper
W TO-TTST snfcft -qr MM
R1 t(TWt T> RT
I
Attempt All questions
All questions carry equal marks Wft 3tPC
W=Tt 3?3> TR f I %
1 (a) Company A and B have been offered the following rates pa on a $10 million five year loan
Fixed rate Floating rate
Company A 13 0% LIBOR + 0 2%
Company B 14 4% LIBOR + 0 1%
Company A requires a floating-rate loan, company B requires a fixed rate loan Design a Swap that will not a bank acting as an intermediary,
0 1% p a and that will appear equally attractive to both companies 1 9
(6) An interest rate swap is a financial contract between two parties exchanging or swapping a
\
stream, of interest payments on a notional principal amount on multiple occasions during a specified period In this context explain the meaning and the rationale for the growth of the interest rate swap market 6
C3>) io fafePH wr wpfcr wn *q* a
B f=#rfer *JTWTfecT
M f :
wnpft A 13 0% LIBOR + 0 2%
B 14 4% LIBOR + 0 7%
B ter m I TI Tft eTT-Tt
0 1% TTMqdl
STFFRkTT #ft 2flk %TT TFfH 7 3 3TTfe #fh
() 3KFTT-cff 37prf| # TCH
3Tr srercrft fcqrr jer rmfrr fTcrnf w fm sjsrar si-f! %tt T farfa fr ti" f*r
if ffit||vj| 37TT-J<Cl) INK "T 3T4 sflT '>3Hchl ijcftZ n\m WZ fHTTl|
Or
(3Wrai)
() What is an interest rate swap 9 List the main factors behind the phenomenal growth m the swap market in recent years Give an example to lllustrkte your answer 8
() Briefly identify the differences between World Bank and IMF 7
(7) qH dfcw4 t" ?
A 37T-'ic;d] *MK
-qt vRoFt 'SFWU 3 tR
cf>< fTTT TTT cPjIQ, I
() 3fR f*FRTT3ft
chlfs I
(a) What are the conditions that must be met for a Eurocurrency market to exist 9 Discuss the meaning and characteristics of the Eurocurrency
market 8
0b) In the context of the Eurocurrency market distinguish between domestic issues and euro issues 7
(>) lMK [citi-HMOt Rrl, fvT
3?8f 3 i
i
(TS) Tf TJ 3 T$ T$
c sffa fMfc fTTl
Or
(arasn)
In Frankfurt, the French franc is selling for DM 0 4343 spot and the three months forward rates DM 0 4300 The three months Euro Deutschmark interbank rate is 5 75% and the Euro French franc interbank rate is 9 00%
(a) Are exchange rates and money markets in equilibrium 9 Why 9
(b) Is there any way to take advantage of the situation9
If so, how 9
(c) What rate trends would appear m the market if a large number of operators took the actions
indicated in (6) 9
3 "SF WP 0 4343 DM TTT rfrSPI fasp % 3R 0 4300 DM % I
(r) tt fMw? f ?
?
() RT 331% T TTRTT |
f, # fer toi ?
!
i
(71) WH 3 Traielobi RT OTI 0) 3 TRT yprt T% TR *TRTC 3 *RT 3TfM ?
(o) An MNC has accounts receivable of $ 1 8 bilhon and accounts payable of $940 million It also has borrowed $700 million The current spot rate is $1 8138/
(i) What is the MNCs dollar transaction exposure m dollar terms 9 In pound term 9
(u) Suppose the pound appreciates to $2 1122/, what is the MNCs gain or loss, in pound terms, on its dollar transaction exposure 9 8
(6) A foreign company cxpects to receive Mexico $15 million entertainment fees from Mexico m 90 days The current spot rate is SO 2320/MexS and the 90-day forward rate is $0 2240/Mex$
(i) What is the Companys peso transaction exposure associated with this fee 9
(u) What is the expected U S dollar value of the fee if the spot rate expected in 90 days is $0 2305 Also calculate the hedged dollar value of the fee 9 7
(3) fPFT #01 18 flfcKH
tfcK | A 940 %\
700 Mwn f,
cNh mm $18138/ ti
(i) -sleK PiM'H
TT t ? w 3 ">
() *IH WfT7 WS- 3TT 3#TH $2 1222/ TIcTT %, cR PiJIH >SKrR
-qr qT 3 to wt -qi #Tt ?
J () Ti DHi 3Jt 90 'fcr 3 3 TrfsRT3Ft
$15 ftfeR TRtjR -Ep fi cfft "STvW tl cTcFI $0 2320/RT $ t 90 3 $0 2240/RT $ tl (i) J ifr 'QW W 3TT %7t
TfMm TO t 9 (m) 90 'H'enfVTtl clcl $0 2305
t, 37 37T TJ[ yoHlllcl TJT
/ TO t 7 TTlmfRT TT 37T
oy IchcrR Mt irTT I
ir
Or
(3TOn)
Write notes on
(a) Leading and Lagging
(b) Blocked funds
(c) Purchasing Power Panty theory 15
y
/
fOTTjft PdftsTM, :
(>) 3TTRTT
Cm) 375 ftfMT
(7j) grq TO teRTl
4 (a) With respect to the Bretton Woods System, explain
the role of the dollar and the immediate cause of its collapse What lessons can economists draw from the breakdown of the Bretton Woods
System 9
(ib) Discuss the challenges facing Multinational Corporations in the present environment
What are the distinguishing features of International
finance 9
(0 to 'srqicft 3ft
*3 TT?FT cfTT cTTr#T m to
03) WFt
TT fq-cji chifM. I
srnrf1*? fr tt M?t 3rf*n?rsm f ?
j
Or (3WR0
Indus Ltd is the wholly owned Indian subsidiary of US based company, Gofts Ltd Non-consolidated balance sheets of both Gofts Ltd and Indus Ltd , (only foreign operations), in thousands, - are as follows
Assets Gofts Ltd. Indus Ltd. (affiliate)
L,
Cash $2,200 Rs 8,000
*
Accounts receivable 2,400 4,600
Inventory 2,400 7,000
Net plant aid equipment 4,600 9,000
Investment | 2,000
\ - -
Total $13,600 Rs 28,600
' Plant & equipment and common stock were acquired when exchange rate was Rs 38 20/$
Liabilities and Net Gofts Ltd.
(affiliate)
Accounts payable
Common stock
Retained earnings
Rs 28,600 s
The current exchange rate is Rs 43 20/$ Gofts Ltd
translates by current rate method
Calculate the accounting exposure for Gofts Ltd by the current rate method and monetary/non-monetary
method
Make suitable assumptions wherever required 15
ch'TXHl Tjfq
ofl# *TTtcfN ti 7ffqe %
7 fcT, smfer *q5i, (er faTt
|
|
skI ybi< |
t : |
|
Assets |
Gofts Ltd. |
Indus Ltd. (affiliate) |
|
|
$2,200 |
Rs 8,000 |
|
|
2(400 |
4,600 |
|
RTT |
2,400 |
7,000 |
|
|
'<MVbi 4,600 |
9,000 |
|
|
2,000 |
|
|
|
$13,600 |
Rs 28,600 |
** 3?k <3TOH ?R %II 7TTT Mm
38 20/$
Liabilities and Net Gofts Ltd* Indus Ltd.
Worth " 1 (parent) (affiliate)
/ $1,000 Rs 12,000
J
/
r
'gfrrmftcT
Rs 28,600
WTR MWT 43 20 ?/$ tl % TcfaH
\
Mia<ui <dl tl
fh # TH Weft 3?K TcFT/wfer TPTTeft <rtsJI=b*?T qfefdd i
#1W -chir-ILJi
5 (o) Distinguish between ADRs and GDRs 5
(6) Distinguish between a forwards and futures
contract Give examples to illustrate your
answer
(c) What is multilateral netting With the help of
an example explain the process of multilateral
\.
(5F) ADRs GDRs I
() 3T <$K -q qFTTJ I 3T tR
C7!) 3 rr wJ t ? fzn
yfsh'MI I6<ul "BWFTcTT
SFftfTR I
Or
(swrai)
Given the following data Spot Rate Rs 46 0010 = $1 6 month forward rate Rs 46 8020 = $1 Annualised interest rate on 6 month rupee 12 per cent Annualised interest rate on 6 month dollar 8 per cent Calculate the arbitrage possibilities 15
PiHfaRsId 3TTSJK t :
clfm '51 : 46 0010 ? = $1
6 3# = 46 8020 ? = $1
6 oufiWltd "sqR : 12 WldlcT
6 < : 8
3T?TT-WT nR=hfcid *b\U\ I
\
6472 16 600
Add comment
| Earning: Approval pending. |
|
|
