IB0010 INTERNATIONAL FINANCIAL MANAGEMENT

Dear students to get solved assignments of SMU MBA FALL 2014 call us at 8510092683 or mail us at mhanda74@gmail.com1 Write short notes on:

a) Measuring exchange rate movements

Answer: Exchange rates respond quickly to all sorts of events - both economic and non-economic. The movement of exchange rates is the result of the combined effect of a number of factors that are constantly at play. Economic factors, also called fundamentals, are better guides as to how a currency moves in the long run. Short-term changes are affected by a multitude of factors which may also have to be examined carefully.b) Factors that influence exchange rates

Answer: In foreign exchange trading, technical indicators such as charts and moving average lines are very significant in the determination of movement of the prices of various currencies.

2 The key component of the financial system is the money market that acts as a fulcrum of monetary operations.

Write down the important points under each category mentioned below.

a) Functions performed by money market

Answer: One of the key components of the financial system is the money market that acts as a fulcrum of monetary operations that are carried out by the Central bank while pursuing the objectives of monetary policy.

b) International interest rates

Answer: Money market rates are interest rates used by banks for operations among themselves. Money market enables the banks to trade their surpluses and deficits.

c) Standardized Global Market regulations.

Answer: Regulations contribute to the development of international money markets because these impose restrictions on local markets.

3 Thousands of years back the concept of bartering between parties was prevalent, when the concept of money had not evolved. Explain on counter trade with examples

Answer: Thousands of years ago, the concept of bartering between parties was prevalent, when the concept of money had not evolved. A person could give say 100 bags of wheat and get wood or

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4 There are different techniques of exposure management. One is the Managing Transaction Exposure and the other one is the managing operating exposure so you have to explain on both Managing Transaction Exposure and Managing Operating Exposure.

Answer: Managing Transaction Exposure

Transaction exposure calculates gains or losses which occur after the current financial compulsions according to terms of reference are resolved. Taken that the deal would lead to a future inflow or outflow of foreign currency cash, any unprecedented alterations in rate of exchange amid the period in which transaction is entered and the time taken for it to settle in cash would guide to a change in worth of net flow of cash in terms of the home currency. For example a transaction exposure of an Indian company will be the account receivable which is associated with a sale denominated in US dollars or the compulsion of an account payable in Euro debt.

5 Every firm is going on concern, whether domestic or MNC. Explain the techniques of capital budgeting and the steps to determine cash flows.

Answer: Techniques of Capital Budgeting

There are many techniques which can be used to analyze the projects. These techniques can be broadly classified into discounted cash flow techniques, which include net present value (NPV), internal rate of return (IRR), profitability index (PI) and discounted payback methods, and non-discounted cash flow techniques which include payback and accounting rate of return (ARR) methods.

6 Write short note on:

American Depository Receipt (ADR)

Answer: It represents ownership in the shares of a non-US company and trades in the American stock markets. ADRs enable American investors to buy shares in foreign company without any issue of cross-border and cross-currency transactions.Global Depository Receipt (GDR)

They are used in Global Equity offering to international investors. It can be considered as global finance instrument that allows an investor to raise capital at the same time from two or more markets.

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