NMIMS
Global Access
School for Continuing Education (NGA-SCE)
Course: International Finance
Internal Assignment Applicable for April 2022 Examination
1. The
changing global economic environment and a number of market related factors
cause the exchange rates to fluctuate constantly. This poses a challenge to the
MNCs operations in multiple countries in terms of foreign exchange risk.
Describe what is your understanding of forex risk. How can you classify the
different forex risks? Give an example for each classification of the forex
risk (10 Marks)
2.
Suppose that you are a manufacturer of textiles and you are planning to expand
your business by capturing the export markets in Europe and African regions. In
terms of operational issues relating to the carriage and delivery of goods, you
are ought to be aware of various trade practices followed in different
countries. In this regard, explain various INCOTERMS published by International
Chamber of Commerce, that make it easier for a common interpretation. (10
Marks)
3. A
trader collects the below information to devise his forex management strategy
during the next year:
Spot Rate of USD: INR 74.40
Interest rates in USA: 2.5%
Interest rates in India: 6.5%
a. What
is Interest Rate Parity Theory? What will be the expected exchange rate in the
above case, if the interest rate parity theory is assumed to hold good. Also
calculate the forward premium or discount. (5 Marks)
b. What
is covered interest arbitrage? If there is a one-year forward contract
available at INR 75.60, is there a CIA possible, and if yes, write the steps to
earn arbitrage profit (use an equivalent amount of INR 1000000) (5 Marks)
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