Question Paper Set- I

T.Y.B.M.S
Subject- International Finance
Max Marks- 75
Time- 2.5 Hours
N.B
1) All Questions are compulsory
2) Each Question carries 15 marks
3) Marks to the right indicate full marks

Q. 1 Answer any Two in brief

a) What are the different components of BoP?

b) What are the factors that affect Foreign Exchange Rates of the currency?
c) USD/INR 52.9885/35
EUR/USD 1.2870/80
Calculate INR/EUR quotation.

Q.2 Answer any Two in brief

a) Spot CAD 1.0297 per USD

73 days Forward CAD 1.0307 per USD
USD interest rate 0.75% p.a
Calculate CAD interest Rate

b) What is the difference between Fixed Exchange rate and Floating Exchange Rate?

c) Explain the mechanism of Bretton Woods System.

Q.3 Answer any Two in brief

a) What are the reasons for the evolution of EURO Currency Market?

b) Explain the mechanism of ADR.

c) Differentiate between FDI and FPI.

Q.4 Answer any Two in brief

a) Explain the structure of Foreign Exchange Market in India.

b) What are the different tools to overcome transactional risks in the foreign exchange
transactions?

c) What is the difference between BASEL I and BASEL II norms?

Q. 5. Case Study

The rupee fell for the first time in three days, tracking losses in Asia's stocks and currencies, on
concern China's move to raise bank reserve ratios will cool the region's economic growth.

The currency, which completed four straight months of gains on April 30, retreated as the
Bloomberg-JPMorgan Asia Dollar Index slid for a second day and the MSCI Asia-Pacific Index
of regional shares dropped for a fourth time in five days. The Sensex fell 1%. The People's Bank
of China on Sunday raised reserve ratios for lenders by half a percentage point with effect from
May 10.

"The rupee is tracking the weakness in Asian equities after China's latest monetary tightening,"
said Vikas Babu, a currency trader at Andhra Bank in Mumbai. "In spite of the temporary
setbacks triggered by negative global news, the outlook for the rupee remains robust, supported
by India's strong economic fundamentals and healthy capital inflows."

The currency declined 0.4% to 44.52 at the close of trade Monday. The currency has advanced
4.5% so far this year, the second-best perform.

Forwards are agreements in which assets are bought and sold at current prices for future delivery.
Non-deliverable contracts are settled in dollars rather than the local currency.

1) What is the impact of increase in reserve ration by the Central Bank? (5)
2) Define Non Deliverable Forwards and distinguish between Domestic Forward rate and
NDF rates. (5)
3) What is the correlation between Capital Market and Exchange rate. (5)