INSTITUTE OF MANAGEMENT TECHNOLOGY

CENTRE FOR DISTANCE LEARNING

GHAZIABAD
End-Term Examinations – December 2009
Subject Code : IMT-45 Time Allowed : 3 Hours
Subject Name: International Finance & Global Capital Market Max. Marks : 70

Notes: (a) Answer any FOUR questions from SECTION-A and CASE STUDY as given in SECTION-B.
Each Question (SECTION-A) carries 14 MARKS and (SECTION-B) Case Study carries 14 MARKS.
(b) For students enrolled before January 2008, the Question Paper would be treated for 50 marks instead of 70 marks.
(c) No doubts/clarifications shall be entertained. In case of doubts/clarifications, make reasonable assumptions and proceed.

SECTION-A MARKS : 56

Q1. Examine the policy guidelines and procedures for external commercial borrowing (ECBs).

Q2. Define SWAPS. Differentiate between interest rate swap and currency swap with example.

Q3. What do you understand by purchase and sale of foreign exchange? What are the different types of Credit
Instruments used in effecting foreign remittances?

Q4. Write short-notes on any three of the following:

(i) ADR
(ii) GDR
(iii) Euro-currency Market
(iv) Packing Credit

Q.5. What does the term Foreign Exchange Rate mean? Briefly discuss the Factors affecting Foreign Exchange
Rate .The relative inflation rate of different countries will have impact on their currency exchange rates.

Q.6. What do you understand by Letter of Credit? What is its significance in the financing of foreign trade? Explain
the working of Letter of Credit using Diagram.
Q.7. Write short notes on any three of the following:
(i) Forfeiting
(ii) Cross Exchange rate
(iii) Leading & Lagging
(iv) Arbitrage & interest arbitrage

SECTION-B (Case Study) MARKS : 14

Suppose that interest rate in XYZ Country is 24 percent p.a and 8 percent p.a in U.S.You are considering investing $
10,000 for 180 days in XYZ’s securities but are concerned about the exchange risk. XYZ’s currency is crown. You
find the following quotations in the newspaper in U.S.dollar terms:
XYZ Country (crown) spot $0.1000
30-day forward $0.0980
90-day forward $0.0970
180-day forward $0.0950
(a) Calculate the forward premium (discount) of the crown against the U.S. dollar for 180 days.
(b) Suppose the crown depreciates by 10 percent relative to the dollar in the next 180 days; what is your net gain or
loss from an uncovered position relative to investment in the U.S.
(c) What is your net gain or loss from a covered position?

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