SUBJECT CODE: 251424MG MBA- 4"'Semester Examination April-May 2022 Specialization: FINANCE Course: INTERNATIONAL FINANCIAL MANAGEMENT Maximum Marks: 80 ‘Time Allowed: 3 Hours Minimum Pass Marks: 32 ‘Note: Attempt all § question. Part A is compulsory, attempt any one from Part B and C for each question QNo. Question Marks ; Se A. | Differentiate between International finance and Domestic finance. 2 What are the three components of balance of payment, state the ideal situation related to | 4 ' | B | Capital, current and financial accounts? | | © | Explain the nature and scope of international financial decision, 4 |, | Explain the mechanies of currency forwards, How do settlement rules differ for spot and | > forward currency contracts? Rahul is a forex trader who has USD I Million in hand. How can he make arbitrage gains when he detects the following exchange rates — B_| USD/GBP = 1.5028 14 EUR/USD = 0.8678 EUR/GBP = 1.3021 USD/INR SPOT = 77.80/78.06 3- MONTHS SWAP = 8/16. Calculate the three months forward rate. USD is at premium or discount? How much is the annualized premium or discount? Suppose that a lapiop costs 1,000 dollars in the United States and 800 euros in the A. | Eurozone. If absolute PPP holds, and Europe and the United States trade only laptops, | 2 ‘what is the dollar-euro exchange rate? 14 | Define interest rate parity theory. Derive the relation betweea exchange rate and interest a rates. q Current rates in market are USD/EUR spot 0.8744 3-Months EUR interest rate is 4% and in New york itis 6%. C | If covered interest parity holds, What will be the forecast for three months forward | 14 rate.Also calculate the forward rate when the interest rates are exchanged. Explain the rates derived. ‘A. | What are currency futures. Explain their similarity and difference with currency forwards. | 2 wp | How are futures traded? Explain the features of currency futures contract. IF the payment | 4 ‘ and receipt is in foreign currency, what positions will the trader take? Explain. Today is Marchl; a UK firm has imported goods worth USD 6 million. The payment is | due on June 1, The spot rate is USD/GBP is 0.6343 and June Futures are trading at 0.6371. | 4 Explain how the firm will hedge its payable using futures if on June 1, the spot tums out to bbe 0.6375 and June futures price is at 0.6390. (CONTRACT SIZE 10,000 USD) | A. | “Option vahies can never be negative”. True or false? Why? z 2 5 | B | What are currency options, what are their different types, explain their basic terminologies, | 14 ‘Show the profit profile of call and put option buyers graphically. Show the relation using a USD/INR. Make necessary assumptions