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Roll No........................... Total No.

of Questions : 13]

[Total No. of Pages : 03

Paper ID [B0132]
(Please fill this Paper ID in OMR Sheet)

BBA (701) (S05) (Sem. - 5th/6th) INTERNATIONAL FINANCE


Time : 03 Hours Maximum Marks : 75

Instruction to Candidates: 1) Section - A is Compulsory. 2) Attempt any Nine questions from Section - B. Section - A Q1) (15 2 = 30) a) Find a recent example of a nations foreign exchange market intervention and note what the govt.s Justification was. Does this justification make economic sense? b) Is a floating-rate system more inflationary than a fixed-rate system? Explain. c) Explain the motives of principal users of the forward market. d) Define the term floor trader. e) Countries with high inflation need to keep devaluating their currencies to maintain competitiveness. But countries that try to maintain their competitiveness by devaluing their currencies only end up with even higher inflation. Discuss. f) What is the difference between a Eurocurrency loan and a Eurobond? g) A foreign project that is profitable when valued on its own will always be profitable from parent firms standpoint. True or False. Explain. h) Define the term option. i) Differentiate between call option and put option. j) What do you mean by intrinsic value of option? k) What is the most appropriate means of managing expropriation risk?
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l) m) n) o)

Define the term factoring. What do you understand by Letter of Credit? Discuss the advantages of International Equity investing. Define the term countertrade. Section - B

(9 5 = 45)

Q2) The experiences of fixed exchange rate systems and target-zone arrangements have not been entirely satisfactory. What lessons can be drawn from the breakdown of Bretton Woods system? Q3) What risks confront dealers in the foreign exchange market? How can they cope with these risks? Q4) Why was International Monetary Fund established? How far has it succeeded in achieving its objectives? Q5) The maintenance of moneys value is said to depend on the monetary authorities. What might the monetary authorities do to a currency that would cause its value to drop? Q6) Discuss the types of simple interest rate options. Q7) How sensitive is the value of project to the threat of currency controls and expropriation? How can financing be structured so as to make the project less sensitive to these political risks? Q8) What are the basic differences between forward and future contracts? Between futures and options contracts? Q9) Ford buys a French franc put option (Contract size is FF2, 50,000) at a premium of $ 0.01 per franc. If the exercise price is $ 0.21 and the spot price of franc at date of expiration is $ 0.216, what is Fords profit (loss) on the put option? Q10) What indicators would you look for in assessing the political riskiness of an investment in India?
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Q11) What are the advantages and disadvantages of centralizing the cash management function? Q12) Why might investors and borrowers be attracted to an ECU Bond? Q13) Discuss the various types of letter of credit.

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