International Finance — DU Bachelor of Management Studies Previous Year Question Papers

Vame of the Paper: International Financ Qla. The following spot exchange rates are quoted in the inter-bank market: Calculate the bid and ask rates for GBP/INR; EUR/INR; and INR/JPY omarks Q1b. Discuss the features of Global currency market and differentiate it from Domestic currency market. Q1c. What do you mean by De-dollarization? Explain with an example as evidence. 6marks Q2. An Indian importer has three months payable of USD 500,000. The USD/INR spot and forward rates available today in the market are as follows: The prevailing interest rates are as follows: If you are expecting USD/INR Spot after 3 months 90.85/90 then suggest a rational strategy to the importers among the following: No hedging and Forward hedging b. Money market hedging c. In the case of forward hedging, what will be the impact if the importer needs money at the end of 2nd month itself i.e. one month in advance? Mention your assumptions (if any). Q3a. The quotations available in the market are as follows: Calculate all possible (at least two arbitrage opportunities and show the cash flow. Q3b. Briefly explain Swap-in and Forward-forward-in with the help of an illustration. Q4a. Given the following information: Spot rate (USD/INR) = 89.90 1-year interest rate in India = 6.8% p.a. 1-year interest rate in the USA = 4.2% p.a. Using the Interest Rate Parity theory, calculate the 1-year forward rate. Comment on the movement of the Q4b. What do you mean by Purchasing Power Parity? Explain its relevance in forecasting the exchange rate with the help of an example. 9marks ` Q5a. Show the possible netting .in the following case: Argentina to Bharat: $250m; Argentina to China: $50m Argentina to Denmark: $250m; Bharat to Argentina: $300m Bharat to China: $150m; Bharat to Denmark: $300m China to Argentina: $270m; China to Bharat: $230m China to Denm'prk: $400m; Denmark to Argentina: $600m Denmark to Bh.`arat: $500m; Denmark to China: $300m Q5b. A portfolio manager is considering the benefits of increasing his diversification by in vesting overseas. He can purchase shares in.individual country funds with the following characteristics: I India (%) UK (%) Spain (%) Expected return 15 12 5 Standard deviationofreturn 10 9 4 Correlation withIndia 1.0 0.33 0.06 What is the expected return and standard deviation of return of a portfolio with 25 percent invested in the United Kingdom, 25 percent ip Spain and 50 percent in the India? Assume correlation between UK and Spain is 0.67 Q5c. Explain Adjusted'.Present Value method for International Project appraisal? 6 marks Q6a. Mart India Public Ltd has its wholly owned subsidiary operating in Brazil where it maintains its account in Brazilian Real (RS). At the end of the financial year 2024-25 the balance sheet and income statement presented in RS are as follows. Translate the balance sheet and Income statement in Indian Rupee using Temporal and CulTent Rate method. 6+6=12 marks Balance Sheet (RS million) Net Fixed Assets 3500 Total Assets 4000