International Finance — DU B.Com. (Hons.) Previous Year Question Papers

Type of Paper : DSE RA Max. Marks: 90 3. Part of the questions to be attempted together Qs 1 (a) What are the advantages and limitations of a flexible exchange rate regime. (9) (b) What were the main objectives of the Bretton woods system. Why did the system fail? (9) Qs 1(a) What are the various issues of international trade and finance (9) (b) Discuss the evolution of International Monetary System (9) Qs 2 (a) Utah bank's bid price for Canadian dollars is Rs 60.24 and its ask price is Rs 61. i What is thers alect she spread What is the bid/ask spread (8) po) The exchange rates are quoted for maturiy of one month, to months, three months, ete. using swap Two months Three months Currency pair Spot One month forward forward forward Calculate the outright forward rates quotes for one, two, and three months forward. Also calculate the spread. Qs 2 Distinguish between : a. Spot and Forward rate b. Bid and Ask Price (3x3=9) c. Direct and Indirect quote 1b) Consider the following table given below and compute the missing cros rates. Show your working CAD Qs 3 (a) Discuss the implications of Interest rate parity for exchange rate determination (9) (b) Consider the data given: Spot exchange rate: Rs 60/ $ 3-month forward rate Rs 59/$ Interest rate in Indian Market: 6% p.a. Interest rate inUS Market: 8% p.a. Is there any arbitrage opportunity? Calculate the gain, if any. (9) Qs 3(a) What do you understand by Exchange rate? Explain various factors affecting exchange rate. (b) What is the expected relationship between inflation differential of two countries and the exchange rate of their currencies. Show graphically (9) Qs 4 (a) How do you define Transaction exposure. How is it different from Translation exposures? Please give relevant examples. (b) What are the advantages of a currency option contract as a hedging tool compared with the forward international equity markets (8 marks) Qs 4 (a) Write a note on ADRs and GDRs, and explain how these can be used to raise money from the Qs 4 (b) An Indian exporter has an ongoing order from USA for 2,000 pieces per month at a months and payment is obtained immediately on shipment of goods, calculate the loss/gain due to transaction The exchange rates are currently Rs.35/$ and Yen 120/$. Assuming that the order will be executed after 3 exposure if the exchange rates change to Rs.36/$ and Yen 110/S. (10 marks) Estimated cash Inflow (in millions of pounds) i. Write a short note on any 3 of the following: Issues in International finance ii. Global bonds iii. Risk in cross border investments iv. Speculation in forex market v. Pegged vs Flexible foreign exchange rate (3*6) Three months forward 100/90 (9 marks) JPY forward 30/40 Le Lat able later de La lae he hah later ade 2e (9) Spot 1.2000/50 USD 0.4923 96.1538 1.1600 Currency pair $/Euro Currency