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

Students will be provided with PVIF table whenever asked for. 1. (a) • What are the risks involved in international business ? Discuss. 9 (b) Explain the objectives of Bretton Woods System and reasons for its failure. (a) How the globalisation of business has impacted the business and what are the issues involved in international business ?. 9 (b) Discuss the evolution of International Monetary System. 9 2. (a) Consider the following table. The foreign exchange spot rate is given, and you have to calculate the one-month, two-month, and three-month forward rates. You also have to calculate the Spread. 9 Currency pair Euro Vs. dollar (g) 0990L döäd búønố ø bvd ban fü zø øøn q b b øn d Spot rate 1 US $ = 7 48.0123. 180 days' forward rate for 1 US $ = 7 48.8190. Annualised interest rate for 6 months - 7 = 12%: Annualised interest rate for 6 months - US $ = 8%. Is there any arbitrage possibility ? If yes, how an arbitrageur can take advantage of the situation, if he is willing to borrow 7 40,00,000 or 3. (a) What is Fisher's Effect? Explain its significance. 9 (b) Explain the significance of bid and ask rates in spot trading. Discuss how forward rates differ from spot rates. 9 (a) What are cross exchange rates ? Explain with an example. Discuss the importance of cross rates in global currency markets. g (b). Discuss the factors that contribute to currency appréciation or depreciation. 9 4. (a) Differentiate between transaction and translation exposure. 9 (b) Discuss the management of currency risk using currency forwards and futures. 9 (a) Differentiate between GDR and ADR. 6 (b). A borrower borrows $ 2.0 million for three months, six months from now at LIBOR flat. LIBOR is 7.5 per cent at present but is expected to rise to 9 per cent after three months. In order to hedge the rise in interest rate, the borrower buys an FRA. How much the borrower will receive from the seller of the FRA ? 12 5. (a) An Indian firm is planning to invest in US. The project will require an initial outlay of USD 100 Million. The expected cash flow after tax for next 5 years is as following : Yrs. CFAT (in USD millions) The cost of capital of the company is 15%. It is forecast that INR will depreciate by 3% p.a. with the initial exchange rate being INR46/USD. Evaluate the project on the basis of NPV. 12 (b) A proposal involves an initial investment of $ 20,00,000. The annual cash inflow is $ 10,00,000 for three years. Find out the Internal Rate of Return (IRR). 6 (a). What are the risks faced by international investors ? Distinguish between Green Field and International Acquisition. 9 (b) Explain the estimation of cash flows from cross border investment projects. 9