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Fall-2013 Master of Business Administration - MBA Semester 4 MF0016–Treasury Management-4 Credits (Book ID: B1814) Assignment (60 Marks) Note: Answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme. Each Question carries 10 marks 6 X 10=60. Q1. Consider you are the chief financial officer of a software company. How would you oversee the company’s Treasury function? Discuss how you formulate the treasury policy. Answer. The treasurer’s functions can in principle be classified as follows:  Core functions (functions which can be found in every company)  Marginal functions (activities which are extremely company-specific and/or only form part of the treasury in selected cases), as well as  Functions, marginal sectors and interfaces to other organizational units or tasks which, whilst being important to the treasury, do not normally form part of the treasurer’s role. Q2. The interest rate offered on Certificate of Deposits varies from bank to bank. Refer some of the public sector and private sector banks and analyze the factors affecting the interest rates. Answer. A certificate of deposit (CD) is a time deposit, a financial product commonly sold in the United States by banks, thrift institutions, and credit unions. A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination. CDs are generally issued by commercial banks and are insured by the FDIC. The term of a CD generally ranges from one month to five years. CDs are similar to savings accounts in that they are insured and thus virtually risk free; they are Q3. Explain in detail the process incorporated by any financial services company that operates in commodity market transactions. Classify the risks associated. Answer. Transaction process in Commodity market: Step 1: Buyer sends a Letter of Intent (LOI) to the Seller’s Mandate address.

Step 2: Seller produces a corporate offer to the Buyer with details for the commodity transaction. Q4. Explain the different types of liquidity risks. Explain the framework for measuring and managing the liquidity risks. Answer. In finance, liquidity risk is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit). Liquidity risk can be caused by a wide variety of economic conditions, but in general, it occurs when one party (an investor or a bank) can’t sell a particular asset on the open market because there’s no other party able or willing to trade for it. Q5. Compare and contrast the different types of foreign exchange risks of a multinational corporation (MNC) based in India. Answer. Foreign exchange risk (also known as exchange rate risk or currency risk) is a financial risk posed by an exposure to unanticipated changes in the exchange rate between two currencies. Investors and multinational businesses exporting or importing goods and services or making foreign investments throughout the global economy are faced with an exchange rate risk which can have severe financial consequences if not managed appropriately. The following are the major risk factors in FX trading:  Exchange Rate Risk  Interest Rate Risk Q6. Briefly explain at least three actions relating to treasury that have changed substantially with globalization. Visit a bank and analyze the various treasury products offered by the bank to its customers. Identify which of these are suitable for a large company with cash to invest, and why. Answer. Latest developments: A number of important trends in treasury management represent a continuation of former trends are thus considered evolutionary, while others represent major changes and are considered revolutionary. Electronic Commerce and globalization are examples of evolutionary trends, while recent legislation such Sarbanes-Oxley and the Check Clearing for the 21st Century Act (“Check 21”) represents revolutionary trends.

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