ITM BUSINESS SCHOOL, SIRUSERI CAMPUS, CHENNAI PGDM – FINANCE, 5th SEMESTER MULTI – NATIONAL FINANCIAL MANAGEMENT PART

A
1. Foreign Exchange in India is controlled by : a) SEBI. b) Ministry of Finance, Govt of India. c) EXIM Bank. d) Reserve Bank of India.
2.

Which of these is not an off shore financial centre? a) London. b) Singapore. c) Tokyo. d) Shanghai.

3.

Which of the following does not belong to the World Bank Group? a) IFC. b) BIS.
c)

IBRD.

d) ICC.
4.

Which one of the following are long term sources for financing projects? a) Euronotes. b) ECBS.

c) Basis Risk. d) AMFI. . b) Political Risk. c) FEMA Rules. Which of the following is an exchange rate exposure? a) Sovereign Risk. 8. 6. Which instrument below is not a derivative product? a) Option. d) FCNR Deposits. spot deal means: a) Delivery of foreign exchange on the second working day from the date of contract. 5. b) FIMMDA. Foreign Exchange transactions in India are regulated by : a) FEDAI. 7. In the interbank foreign exchange market . c) SWAP. b) Forward Contract. d) Translation Risk.c) Letters of Credit. foreign exchange on the day of c) Delivery of foreign exchange on the next day of transaction. b) Delivery of transaction. d) Delivery of foreign exchange after two working days from the date of transaction.

11. c) African Development Bank. futures provide transparent trading 10. b) Opening Bank. c) Agreement between buyer and seller. c) Beneficiary. c) Currency futures offer efficient price discovery. d) Transport Document. Which one of the following is not a document under a Letter of Credit? a) Bill of Exchange. d) Currency platform. d) Governments of Importer and Exporter. . Which of the following statements is not correct? a) Currency futures are standardised products. Which one of the following is not a party to Letters of Credit? a) Applicant ( Opener ). b) ADB Asian Development Bank. Which one of the following is not an International financial institution? a) IMF.d) TT Buying Rate. 12. 9. b) Currency futures do not eliminate counterparty credit risk. d) Bank of America. b) Invoice.

c) It operates Special Drawing Rights. Which of the following is an off balance sheet item? a) Options. 16. c) ALM. Which of the following are not authorised to deal in foreign exchange? a) Nationalised Banks. c) Automation in banks d) Stricter regulation by Central banks. b) It is a bankers’ bank. d) Short Term Credits. 14. . c) Scheduled Foreign Banks. d) NBFCs. Which one of the statements is not true for the Bank for International Settlements? a) It provides research and statistics. 15. Which of these factors have contributed to the growth of International Banking? a) Reduction in trade barriers and globalisation of financial markets. b) VAR. b) Private Sector Banks. b) Growth in domestic assets of banks.13.

d) To raise funds in multiple currencies. b) A foreign project is more beneficial when the foreign currency depreciates over the life of the project. c) To avoid market risk. d) A foreign project is more beneficial when the foreign currency is devalued. Which one of the following statements is true? a) A foreign project is more beneficial when the foreign currency appreciates over the life of the project. 19. b) To avoid transfer risk. c) A foreign project is more beneficial when the foreign currency remains static over the life of the project. 17. b) FIIs need not register with SEBI. 20. who is not authorised to deal in foreign exchange in India? . A good rating is derived : a) To raise large funds from the market at low rates of interest. 18.d) It holds current accounts for individuals and Govts. Among the following. c) Shares of FII are held by custodians for an additional charge. d) FIIs have to invest in company’s shares at par in domestic market. Which of the following statements is not true? a) FIIs share in domestic market are in Indian rupees.

b) Non-Banking Finance companies. TRUE 28. Loans 29. underwriting is done in advance. TRUE 22. FALSE is no profit or loss in a forward contract. Subscription is invited from Qualified Institutional Buyers in Euro issue. In Euro issue. TRUE . FALSE are used for risk management. In a forward contract. The maximum length of currency futures is 6 months.a) Authorised Dealers. State whether TRUE or FALSE: 21. There 26. TRUE granted by International Finance Corporation should be secured by Govt guarantee. Derivatives 30. FALSE 27. d) Restricted Money changes. Balance 24. Though China has more FDI than India. India could produce more multinationals than China. TRUE that is higher than in other countries causes a country’s currency to appreciate. maturity can be any date. c) Full-fledged Money changers. Inflation 25. TRUE 23. FALSE of payments is a record of the flow of payments between the residents of one country and the rest of the world in a given period.

. Write a short note on ‘GATT’. What are the factors that determine the exchange rate? 15. Why do companies involved in international trade have to hedge their Foreign Exchange exposure? 6.PART B : 1. What do you understand by Euro currency markets? What are Foreign currency convertible Bonds? 13. 100 million or the foreign currency equivalent for 6 years for setting up offices in China. 3. 7. Why do companies go for External Commercial Borrowings? 14. UK. Japan. What are the important advantages of going multinational? 10. Cognizant Technology Solutions (CTS) wants to borrow Rs. Briefly explain the Balance of Payments statement. What is exchange risk? How can it be managed? 9. 5. Explain the rationale behind Purchasing Power Parity. Distinguish between spot market and forward market. 11. 12. Discuss the impact of FDI on India’s economy. Briefly discuss three most popular derivative instruments. What are the principles of WTO? 2. 8. CTS is the second largest software multinational firm with exports to USA. What are the major sources of external international finance for a corporate firm? PART C: 1. 4.

2012). with bonds sold at par. c) d) Borrow in Euros: Borrow in Euros at 8% p.a. 2012) and the yen is expected to appreciate with respect to rupees by 1 %.54. The current exchange rate is 1 Euro = Rs. The alternatives available with the company are as follows: a) Borrow in Indian Rupees: Borrow in Rupees @ 10% p.a. The dollars are available now . b) Borrow in US Dollars: Borrow in Dollars at 6.5 % p. The current exchange rate is Japanese Yen (per 100) 65.Europe. Borrow in Japanese Yen: Borrow in Yen at 5% with 2.a.a.a. Expenses of the issue 2% of the amount borrowed. . c) Spot Exchange Rate is $1. You are the CFO of Ranbaxy Laboratories and for import of drugs have to make a USD 2 million payment in 3 months’ time. b) Sterling Deposit Rate is 9% p. with 1.71.19 (as on Dec 14. The current exchange rate is $1 = Rs.5 % as transaction expenses.85/pound.52 and the Euro is expected to appreciate against the dollar by 3% per year. Evaluate the cost of each alternative and make recommendation to the CEO regarding the right source of debt capital that is likely to be least expensive for the six year period. with 3% as transaction expenses.61 (as on Dec 14. etc.You decide to invest them for 3 months and you are given the following information: a) US Deposit Rate is 7% p. 2.5 % as transaction expenses.

where would you invest if the sterling deposit rate were 14% p. II.82/pound. what forward rate would yield an equilibrium situation? If the US Interest rates and the spot and forward rates as in the original question. . Where should your company invest for better returns? If the spot exchange rate and interest rates remain as above. IV.a.d) 3 months’ Forward Rate is $1. what is the equilibrium sterling deposit rate? III. I.? With the originally stated spot and forward rates and the same dollar deposit rate.

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