(a) International finance is the branch of economics that studies the dynamic of exchange rates,

foreign investment, and how these affect international trade. It also studies the international
projects, international investment and capital flow and trade deficits. It includes the study of
futures, options and current swaps.

(b) Important of studying international finance;

The following are importance of studying international finance:

 Knowledge of international finance can help a manager to decide how international events
will affect a firm and what steps can be taken to exploit positive development and insulate
the firm from harmful ones. Among the events that affect the firms and that must be
managed are charges in exchange rates as well as interest rates, inflation rate and asset
value.

 It helps to get knowledge on the use of financial management in international context.

 In order to study basic and patient theories, concepts applying in international financing
environment.

 In order to understand basic global financial and economic issues as well as international
dimension of the corporate investment and finance decisions with their related challenge.

 Acquire the ability to manage the modern challenges of business and finance is the current
environment of trade liberalization and globalization.

(c) Indicators of internationalization of finance in the current financial environment.

 Increase in communication with customers

 Increase in international bank lending, include in cross bolder lending and domestic
lending denominated in foreign currency.

 Increase in value of securities transaction with foreigner despite the presence of foreign
exchange risk.

 Increase of daily turnover (trade volume) in the global of foreign exchange market.

 Foreign currencies expansion

 Competition forces of market.

 Influence of market imperfection.

 Cost of using market or contractual agreement is higher than that of organizing it

internally.
Amount to be exchanged.

60% of Tshs 4,000,000 into £

4,000,000 × 60%= Tshs 2,400,000

40% of 4,000,000 into €

4,000,000 × 40%= Tshs 1,600,000

The exchange of Tshs into £

The Exchange rate to be used is from is from Exit Bank where the rate is Tshs 188133.66 par £ 100.

Because it is the one which gives us more £ compared to other banks.

According to direct quotation the rate will be the number of units of local currency is expressed per one
unit of foreign currency, where as;

Tshs 188133.66 = £ 100

£ 100 £ 100

Tshs 1881.3366 per £ 1, hence the exchange rate to be used in Tanzania (Arusha) to exchange 60% of
Tshs 2,400,000 into £.

Tshs 1881.3366 = £ 1

Tshs 2,400,000 = £?

= Tshs 2,400,000 × £ 1

Tshs 1881.3366

= £ 1,275.6888

Therefore the amount to be used is £ 1,275.6888.

The exchange of Tshs into

The exchange rate to be used is from Standard Charit Bank where as the exchange rate is,
Tshs 167346.05 per € 100, because is the one gives us the more € than other banks.

Quotation will be;

Tshs 167346.05 = € 100

€ 100 € 100

Tshs 1673.4605 per € 1, hence the exchange rate to be used in Tanzania (Arusha) to exchange 40% of
Tshs 1,600,000 into €.

Tshs 1673.4605 = € 1

Tshs 1,600,000 = €?

= Tshs 1,600,000 × € 1

Tshs 1673.4605

= € 956.1026

Therefore the amount to be used is € 956.1026.

Amount of EURO spent on the way 5%

€ 956.1026 × 5% = € 47.8051

Amount of EURO remained (956.1026 – 47.8051) = € 908.2975

Therefore the remained amount of EURO is € 908.2975.

Change of the remained € into £

Assumption: we applied cross rate In order to obtain the exchange rate between £ and €, from the rates
which are US$/€ and US$/£

Form the FXCM Bureau De Change,

ASK US$/£ 1.4239

ASK US$/€ 1.2714

ASK:

US$ 1.4239 = £ 1

US$ 1.2714 = € 1

US$ 1.4239 × € 1 = €/£ 1.1199

US$ 1.2714 × £ 1

Exchange Rate ASK: €/£ 1.1199

Change of € 908.2975 into £

€ 1.1199 =£1

€ 908.2975 = £?

£ 1× € 908.2975 = £ 811.0523

€ 1.1199

Total amount of £ = 881.0523 + 1,275.6892

= £ 2,086.7415

Therefore the total amount is £ 2,086.7411

Remained amount = total amount – amount spent

= 2,086.7415 – 500

= £ 1586.7415

The exchange of £ into Tshs

The Exchange rate to be used is from is from Exit Bank where the rate is Tshs 184306.52 per £ 100.

Because it is the one which gives us more Tshs compared to other banks

According to direct quotation the rate will be the number of units of local currency is expressed per one
unit of foreign currency, where as;

Tshs 184306.52 = £ 100

£ 100 £100

Hence the rate is Tshs 1843.0652 per £ 1

(Fr –S0/S0)*(52 weeks/’n’ weeks)*100= Annualized %

0.18 = FR – 1843.0652/1843.0652*52

331.7517 = 52FR – 95,839.3904

(331.7517+95839.3904)/52 = 52FR/52

FR = 1,849.4450