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ASSIGNMENT
DRIVE SPRING 2014
PROGRAM MBADS – (SEM 3/SEM 5) / MBAN2 / MBAFLEX – (SEM 3) /
PGDIB – (SEM 1)
SUBJECT CODE & NAME IB0010 & INTERNATIONAL FINANCIAL MANAGEMENT
SEMESTER 3
BK ID B1759
CREDITS 4
MARKS 60
Note: Answer all questions. Kindly note that answers for 10 marks questions should be
approximately of 400 words. Each question is followed by evaluation scheme
1 Write short notes on:
a) Measuring exchange rate movements
Answer : Measuring the exchange rate
Exchange rates are expressed in various ways:
Spot Exchange Rate - the spot rate is the rate for a currency at today’s market prices
Forward Exchange Rate - a forward rate involves the delivery of currency at a specified time in the
future at an agreed rate. Companies wanting
b) Factors that influence exchange rates
Answer : Determinants of Exchange Rates
Numerous factors determine exchange rates, and all are related to the trading relationship between
two countries. Remember, exchange rates are relative, and are expressed as a comparison of the
currencies of two countries. The following are some of the principal determinants of the exchange
rate between two countries. Note
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.

2. a) Functions performed by money market
Answer : There are two types of financial markets viz., the money market and the capital market.
The money market in that part of a financial market which deals in the borrowing and lending of
short term loans generally for a period of less than or equal to 365 days. It is a mechanism to clear
short term monetary transactions in an economy.
Money market is an important part of the economy. It plays very significant functions. As mentioned
above it is basically a market for short term monetary transactions. Thus it has to provide facility for
adjusting liquidity to the banks, business corporations,
b) International interest rates
Answer : In many industrial countries the domestic impact of interest rate developments abroad has
become an increasingly sensitive question. Outside the United States the issue has centred on the
possible influence of high or rising interest rates on a still fragile economic recovery. When inflation
expectations are unknown, interest rate levels are, of course, difficult to interpret, and partly for this
reason interest rates have come to play a smaller role as explicit objectives of monetary policy. In
some - though not all - countries nominal
c) Standardized Global Market regulations.
Answer : The financial crisis of 2007 revealed fundamental weaknesses in the structure of financial
regulation. In response, policymakers and regulators have embarked on an ambitious regulatory
reform agenda that aims to achieve as much global co-ordination and consistency between regional
reform efforts as possible.
How successful attempts at international co-ordination and consistency have been deserves further
examination. Despite most of the regulatory changes taking place under the auspices of the G20,
variations in the approaches taken on both sides of the Atlantic and in Asia can be observed and are
increasingly significant. The general
3 Thousands of years back the concept of bartering between parties was prevalent, when the
concept of money had not evolved. Explain counter trade with examples
Answer : Trading between nations has been happening since time began. In ancient time nations
traded silk, spices, cloth and animals of all kinds. Today nation trade food items, defense equipment,
metals, electronics etc. The products might have changed but the basic concept is still the same as
the underlining need which brings together two nations in a trade relationship still exists.
One such method of trading between nations is called counter trade. Counter trade is an import /
export relationship between nations or large companies in which good and/or services are
exchanged for goods and services instead of money. In some cases monetary evaluations are made
for accounting purposes.
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.

3. Answer : ‘Transaction Exposure’ is a risk which is faced by the organizations which are involved in
international trade especially when they enter into the financial obligations. The risk which is faced
by the companies is about the changes occurring in the currency exchange rates after they have
entered into trade obligations in the international market. Many companies which face such a
situation adopt hedging strategy which allows them to get locked in an exchange rate by using
forward rates to evade the exposure of
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 : Capital investments are long-term investments in which the assets involved have useful
lives of multiple years. For example, constructing a new production facility and investing in
machinery and equipment are capital investments. Capital budgeting is a method of estimating the
financial viability of a capital investment over the life of the investment.
Explanation of techniques of capital budgeting:
There are several capital budgeting analysis methods that can be used to determine the economic
feasibility of a capital investment. They include the Payback Period, Discounted Payment Period,
Net Present Value, Profitability Index, Internal Rate of Return, and Modified Internal Rate of
Return.
 Net Present Value
The Net Present Value (NPV) method involves discounting a stream of future cash flows
back to present value. The cash flows can be either positive (cash received) or negative (cash
paid). The present value of the initial investment is its full face value because the investment
is made at the beginning of the time period. The ending cash flow includes any monetary
sale value or remaining value of the capital asset
6 Write short note on:
American Depository Receipts(ADR)
Answer : An American Depository Receipt, or ADR, is a security issued by a U.S. depository bank to
domestic buyers as a substitute for direct ownership of stock in foreign companies. An ADR can
represent one or more shares, or a fraction of a share, of a non-U.S. company. Individual shares of a
foreign corporation represented by an ADR
Global Depository Receipts(GDR)
Answer : Global Depositary Receipts (GDRs) are negotiable certificates issued by depositary banks
which represent ownership of a given number of a company’s shares which can be listed and traded
independently from the underlying shares. These instruments are typically used by companies from
emerging markets and marketed to professional investors only.
Dear students get fully solved assignments
Send your semester & Specialization name to our mail id :
“ help.mbaassignments@gmail.com ”
or

4. Call us at : 08263069601
(Prefer mailing. Call in emergency )