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

(b)
The elastic nature of short-run foreign demand for exported goods allows export businesses to achieve a temporary advantage

(c)
The elastic nature of short-run foreign demand for exported goods delays the benefits that export businesses should realize

(d)
The inelastic nature of short-run foreign demand for exported goods delays the benefits that export businesses should realize

(e)
The inelastic nature of long-run domestic demand for imported goods allows import business to achieve an unfair advantage.


< ans >

28.
On December 1st, 2005 a German company sells a shipment of spark plugs to a Korean car manufacturer for US$ one million payable on June 1st, 2006. This price was originally quoted on December 1st, 2005. At Frankfurt 6-month forward quote ( Dec first to June first ) is $/€1.2810/1.2820.

provided the spot rates below, What would be the German company’s gain or loss due to transaction exposure?

01.12.2005 $/€ 1.2720

01.01.2006 $/€ 1.2900

01.06.2006 $/€ 1.2700

(a)
€ 5,448.32

(b)
€ (6,759.45)

(c)
€ 4,837.41

(d)
€ (5,523.40)

(e)
€ (6,132.32).


< ans >

29.
According to Article 13 of UPCDC , ICC Publication No. 500, time limit has been fixed to issuing bank, the confirming bank, if any, or a nominated bank acting on their behalf to examine the documents and determine whether to take up or refuse the documents and to inform the party from which it received the documents. The maximum time limit fixed is

(a)
five days

(b)
nine days

(c)
seven days

(d)
15 days

(e)
21 days.


< ans >

30.
A MNC in USA urgently requires $70,000 for 1 month; US bank offers 5% on its deposits. From the subsequent which is the best choice available to the company?

(a)
To avail overdraft facility at 9%

(b)
To take a term loan at 6% with a minimum of $100,000

(c)
To defer payment of a purchase bill of $85,000 for a period of 1 month losing cash discount 1%

(d)
To accept the offer from a debtor willing to pay 1 month credit sales bill of $80,000 by reducing 1% as cash incentive

(e)
To request the bank to purchase the export bills worth $75,000, bank charges 1% on export bills purchased.


< ans >





END OF part A









part B : issues (50 Marks)

Earning:   Approval pending.