INTERNATIONAL FINANCE

Lahore Leads University

Lahore – Pakistan
Final Term Examination Spring 2021

Code: BUSS 423 Instructor’s Name: Dr. Rehana Naheed

Program: BBA Time Allowed : 48 Hours
Total Marks. 40 Type of Question Paper: Open Book

Paper Starting Date: Monday, 5 May 2021 @ 00.01 AM

Paper Closing Date: Sunday, 6 May 2021 @ 23.50 PM

Undertaking:
I certify that I will solve this paper on my own and I will not use any unfair means in completing
it. I am very much aware that the evaluation and grading of this submission are subject to review
and verification and if any unauthorized act is discovered, I may be penalized as per the
University Code of Conduct.
Instructions:
1. Submit the answer sheet at LMS only,
2. The time duration for submission of examination is 48 hours maximum.
3. Only handwritten script preferably written in black will be accepted, the students must
mention their examination name; roll number, etc. Word limit ranges between 250 to
350 words for each question.
4. The answer sheet will only be accepted in word or pdf format.
5. Write your name, roll number, and subject on the answer sheet.
6. Do not copy information directly from the book (notes) or any other source.
7. For any technical problem, while using LMS, the students should contact examination
and Bizsoft. Contact details are given on LMS (student portal).
8. Dear students follow the link to to submit your answer sheets online at
http://leads.edu.pk/OEI.pdf
Note: Attempt all questions and all the questions contains equal marks.

Question No 1: (4+4)

 What is FOREX market? Briefly, define the functions of FOREX? Is forex available in
Pakistan?
 The International economy is fast turning into a borderless global economy" Critically
analyze in relation to International Financial system.
Question No 2: (5+3)

 What are the factors affecting exchange rate of Pakistan, also define from where does the
demand and supply of exchange comes from?
 Utah Bank’s bid price for Canadian dollars is $.7938 and its ask price is $.8100. What is
the bid/ask percentage spread?

Question No 3: (5+3)

 Define forward and future contract, how you can differentiate between the both. Which
contract is better and why?
 What do you mean by the Law of one price? Do you agree with this law?

Question No 4: (4+4)

 If you are provided the following information

Value of Baht in USA dollar Dollar 0.032
Value of Malaysian Ringgit in USA dollar Dollar 0.24
Value of Baht in Malaysian Ringgit Malaysian Ringgit 3.02
By giving this information, is the triangular arbitrage possible? If So, explain the steps that
would explain and compute the profit from this strategy if you had 1,000,000 dollars to use?

 Differentiate between a currency call option and a currency put option. ?

Question No 5: (5+3)

 You are provided with the following details. Calculate the forward exchange rate as per
the interest rate parity concept.

Spot Exchange Rate (Euros/USD) 1.2201

Interest Rate in the United States 7%

Interest Rate in Germany 5%

 Discuss some causes of deviations from purchasing power parity.