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Master of Business Administration - MBA Semester 4
MF0015-International Financial Management
Assignment (60 Marks)
Note: Answer all questions must be written within 300 to 400 words each.
Each Question carries 10 marks 6 X 10=60
Q1. Explain Globalization, Advantages of Globalization and Disadvantages
of Globalization.
Answer. Globalization can be defined as the process of international integration
that arises due to increasing human connectivity as well as the interchange of
products,

ideas

and other

aspects

of

culture.

It

includes

the spread and

connectedness of communication, technologies and production across the world and

involves the interlacing of cultural and economic activity. The term 'globalization' was
used by the late

Q2. In foreign exchange market many types of transactions take place.

Discuss the meaning and role of forward, future and options market.
Answer. Forward Market
In the forward market, contracts are made to buy and sell currencies for future
delivery, say, after a fortnight, one month, two months and so on. The rate of
exchange for the transaction is agreed upon on the very day the deal is finalized. The
rate of exchange for the transaction is agreed upon on the very day the deal is
finalized. The forward rates with varying maturity are quoted in the newspapers and
those rates form the basis of the contract. Both parties have to abide by the contract
at the exchange rate mentioned
Q3. Explain Swap, its features and types of Swap.

Answer: Swap is an agreement between two or more parties to exchange sets of

cash flows over a period in future. The parties that agree to swap are known as
counter parties. It is a combination of a purchase with a simultaneous sale for equal
amount but different dates. Swaps are used by corporate houses and banks as an
innovating financing instrument that decreases borrowing costs and increases control
over other financial instruments. It is an agreement to exchange payments of two
different kinds in the future.

Q4. Explain in detail the types of exposure and measuring economic

exposure
Answer. Types of exposure
Economic Exposure
The potential changes in all future cash flows of a firm resulting from unanticipated
changes in the exchange rates are referred to as economic exposure. The monetary
assets and liabilities, in addition to the future cash flows, get influenced by the
changes in foreign exchange rates. Of all the three exposures, economic exposure is
the most important, as it has an impact on the valuation of a firm. Suppose a
Japanese company imports children toys from India. The same product is also
available from China but it is costly. If the rupee appreciates against the yen and the
Chinese currency decreases against yen, Japan will

Q5. Elaborate on the tools of foreign exchange risk management and

techniques of exposure management.
Answer. Tools of Foreign Exchange Risk Management
Forward contracts: A forward contract is a non-standardized contract that takes
place between two parties for the purpose of selling or buying an asset at a specified
future time at a price that has already been agreed. The party who buys the
underlying position assumes a long position and the party who sells the asset
assumes a short position. Delivery price is the price that has been agreed upon. It is

one of the most common means of hedging transactions in foreign currencies. It

offers the ability to the users to lock in a

Q6. Write short note on:

a. Adjusted present value model (APV model)
b. Forced Disinvestment.
Answer. a. Adjusted Present Value Model
Debt has an advantage over equity since the interest paid on debt is almost always
deductible from income while calculating corporate taxes, which is not the case for
dividends on equity. So, the post cost of debt is less than the pretax cost of debt.
Debt creates additional value for a project. How is this so? By reducing the taxes paid,
so adjustments to the calculation of the projects present value must be made if it
supports additional debt. Therefore, the contribution to present value of issuing debt
is calculated as the present value of tax savings. This present value (PV) can then be
added to the PV of a project calculated using the all-equity cost of capital. The
method of adding the tax benefits of debt to the separately

Fall-2016
Get solved assignments at nominal price of Rs.130 each.
Mail us at: subjects4u@gmail.com or contact at
09882243490