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1. Dear students get fully solved assignments
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help.mbaassignments@gmail.com
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Master of Business Administration
Paper Code: MB FM– 203
Paper Title: International Finance Management
Q. 1. Short answer type questions: Limit 100 - 150
(i) What do you understand by balance ofpayment?
Answer:Balance Of Payment(BOP) isastatementwhichrecordsall the monetarytransactionsmade
between residents of a country and the rest of the world during any given period. This statement
includes all the transactions made by/to individuals, corporates and the government and helps in
monitoringthe flowof fundstodevelopthe economy.Whenall the elements are correctly included
in the BOP, it should sum up to zero in a perfect
(ii) Define anyfive factors whichinfluence exchange rate.
Answer: 1. Inflation rates
Inflation rates impact a country’s currency value. A low inflation rate typically exhibits a rising
currency value, as its purchasing power increases relative to other currencies.
2. Interest rates
Exchange rates, interest rates and inflation

2. (iii) Give five differencesbetweencentralizedversusdecentralizedcashmanagement
Answer: Centralization/decentralization refers to how much decision-making authority has been
delegatedtolowermanagementlevels.Feworganizationscouldfunction effectively if all decisions
were made bya selectgroupof topmanagers,nor couldtheydo soif all decisionsweredelegatedto
the lowest levels of the organization.
(iv) Give five differencesbetweenforwardand future contract?
Answer:The fundamental difference betweenfuturesandforwardsisthatfuturesare tradedon
exchangesandforwardstrade OTC.The difference intradingvenuesgivesrise tonotable differences
inthe twoinstruments:
Futuresare standardizedinstruments transacted through brokerage firms that hold a "seat" on the
exchange that trades that particular contract. The terms of a futures contract - including delivery
places and dates, volume, technical specifications, and trading and credit procedures - are
standardized for each type of contract. Like
(v) Whatdo you understandby translation espouser?
Answer:Translationexposure isakindof accountingriskthat arisesdue tofluctuationsincurrency
exchange rates. The assets,liabilities,equities,andearningsof asubsidiaryof amultinational
companyare usuallydenominatedinthe currencyof the countryit issituatedin.If the parent
companyissituatedina country witha differentcurrency,the valuesof the holdingsof each
subsidiaryneedtobe convertedintothe currencyof the home country.
Such conversioncanleadtocertain
(vi) What do you understandby international finance management?
Answer:International financial management,alsoknownasinternationalfinance,isawell-known
termin today’sworld.Itsimplymeansfinancial managementinaninternational business
environment.Itisdifferentfromfinancialmanagementbecauseof the differentfactorsinvolvedlike
currency,political situations,imperfectmarkets,anddiversifiedopportunitysets.
Objectivesof International
(vii) “Explainthe concept of Interest Rate parity theorems.
Answer:The interestrate parity(IRP) isatheoryregardingthe relationshipbetweenthe spot
exchange rate andthe expectedspotrate orforwardexchange rate of twocurrencies,basedon
interestrates.The theoryholdsthatthe forwardexchange rate shouldbe equal tothe spotcurrency

3. exchange rate timesthe interestrate of the home country,dividedbythe interestrate of the foreign
country.
As withmanyothertheories,the equation
(viii) Do you think cash management system effect the borrowing decisions of a firm?
Answer: What is Cash Management?
Cash management,alsoknownastreasurymanagement,is the process that involves collecting and
managing cash flows from the operating, investing, and financing activities of a company. In
business, it is a key aspect of an organization’s financial stability.
(ix) Explain the concept of Arbitrage in Foreignexchange market
Answer:“Arbitrage” inForeignExchange Market
Arbitrage is the process of a simultaneous sale and purchase of currencies in two or more foreign
exchange markets with an objective to make profits by capitalizing on the exchange-rate
differentials in various markets.
The arbitrage
(x) Explain the conceptof Internal and external techniquesofrisk.
Answer: Riskmanagementiscrucial tothe successof all software development, enhancement and
maintenance projects. Riskmanagementatitsbasestlevel isavoidingproblemsthatcanbe avoided
and recognizingthose thatcan’tbe avoided.In ordertorecognize andavoidproblems,everyproject
must take the steps that need to be taken to consciously look outward and forward. The act of risk
management requires both
(Word limits 500)
Q. 2. Explainthe process ofissuingADR and GDR?
Answer: Whatare AmericanDepositoryReceipts(ADRs)?
American Depository Receipts (ADRs) are a way of trading non-U.S. stocks on the U.S. exchange.
Through ADRs, Indian companies who are willing to raise funds from the U.S. can do so by issuing
shares on American Stock exchange.

4. Q. 3. Explainthe Aspectsof international cash management?
Answer: Management of short-term assets and liabilities - cash, investments, inventories,
receivables and payables, is an important part of finance manager's job. When it comes to
managementof inventories,receivablesetc. there is not much difference between a multinational
and domestic firms. Among these cash management can be considerably more complex for
multinational finns because of possibility of raising and deploying cash in many currencies, many
locations and profit opportunities presented by imperfection in international money and foreign
exchange markets. In this unit, you
Q. 4. Discuss financial structure of foreignsubsidiariesofMNCs.
Answer:Once the decisionaboutoveralldebt-equitymix of anMNC ismade,anothercritical issue
that needstobe addressedastutelybythe MNCparentisto determine the debt-equityfinancing
mix forits offshore affiliates.
Thiscallsuponthe multinational finance managertoevaluate the followingthree options:
i.Debt-equitymix of the subsidiaryshouldconformtothe parentcompanynorms.
Q. 5. Explaindifferenttype of International financial market instruments.
Answer: Instruments are a means to an end. You want to create music, you need a musical
instrument.Youwantto see videos,youneedanaudio-visual instrument/equipment. Similarly, you
want to make some money, you need to own a financial instrument. Financial instruments are
financial contractsbetween interested parties. They can be created, traded, modified and settled.
There are different types of financial instruments, viz, currency, share and bond.
Types of Financial Instruments
Q. 6. Explainthe concept of International Monetary System?
Answer: International monetary system refers to a system that forms rules and standards for
facilitating international trade among the nations.
It helps in reallocating the capital and investment from one nation to another.
It is the global network of the government
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