FM04
International Finance
(For CNM Cases)
Assignment – I
Assignment Code: 2016FM04A1 Last Date of Submission: 30th April 2016
Maximum Marks: 100
Attempt all the questions. All the questions are compulsory and carry equal marks.
Section-A
1. Explain the components of balance of payment (BOP) account. What is the managerial implication of the deficit or surplus of BOP? What is India’s current BOP position?
2. How has the exchange rate evolved over the year? What kind of exchange rate regime does India follows?
3. a. What is foreign exchange market? What are the features of foreign exchange market? Who are the major participants of forex market?
b. What is exchange rate? What are the types of quotation available? If the spot rate of Rs / GBP is: 81.55 – 84.75 and Rs / Euro is: 59.35 – 62.60 then find the spot rate of USD / GBP.
4. Explain the factors which affect foreign exchange rates. What are the parity conditions?
Section-B
Case Study
Following information about exchange rate and interest rate are available:
Spot rate : Rs 56.88 / US$
3 month forward rate : Rs. 61.75 /US$
3 month interest rate in US : 4% pa
3 month interest rate in India: 7% pa
Case Questions:
Does arbitrage gain exist, how? Assuming no transaction cost or taxes exist, what operation would be carried out to take the possible arbitrage gain, if any? Assume Rs. 10 million or US$ 10 million borrowings (as the case may be) to explain your answer.
International Finance
(For CNM Cases)
Assignment – I
Assignment Code: 2016FM04A1 Last Date of Submission: 30th April 2016
Maximum Marks: 100
Attempt all the questions. All the questions are compulsory and carry equal marks.
Section-A
1. Explain the components of balance of payment (BOP) account. What is the managerial implication of the deficit or surplus of BOP? What is India’s current BOP position?
2. How has the exchange rate evolved over the year? What kind of exchange rate regime does India follows?
3. a. What is foreign exchange market? What are the features of foreign exchange market? Who are the major participants of forex market?
b. What is exchange rate? What are the types of quotation available? If the spot rate of Rs / GBP is: 81.55 – 84.75 and Rs / Euro is: 59.35 – 62.60 then find the spot rate of USD / GBP.
4. Explain the factors which affect foreign exchange rates. What are the parity conditions?
Section-B
Case Study
Following information about exchange rate and interest rate are available:
Spot rate : Rs 56.88 / US$
3 month forward rate : Rs. 61.75 /US$
3 month interest rate in US : 4% pa
3 month interest rate in India: 7% pa
Case Questions:
Does arbitrage gain exist, how? Assuming no transaction cost or taxes exist, what operation would be carried out to take the possible arbitrage gain, if any? Assume Rs. 10 million or US$ 10 million borrowings (as the case may be) to explain your answer.
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