BBA603 & ROLE OF INTERNATIONAL FINANCIAL INSTITUTIONS

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ASSIGNMENT

DRIVE FALL	SPRING 2015
PROGRAM	Bachelors of Business Administration- BBA
SUBJECT CODE & NAME	BBA603 & ROLE OF INTERNATIONAL FINANCIAL INSTITUTIONS
SEMESTER	6
BK ID	B1905
CREDITS	4
MARKS	60

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

1 Give introduction to international finance. Explain the benefits, scope of international finance. List the advantages and disadvantages of globalization.

Answer : International finance is the branch of financial economics broadly concerned with monetary and macroeconomic interrelations between two or more countries. International finance examines the dynamics of the global financial system, international monetary systems, balance of payments, exchange rates, foreign direct investment, and how these topics relate to international trade.

Sometimes referred to as multinational finance, international finance is additionally concerned with matters of international financial management.

2 Write short note on:

Ø  Balance of Payment

Ø  Current account

Ø  Capital account

Ø  Foreign exchange reserves

Ø  Accounting equilibrium

Answer : Balance of Payment :  Balance of Payments is the record of a country’s transactions with the rest of the world. Terms like trade surplus and deficit are used to describe if the country has more or exports than

Ø  Current account : The current account consists of the balance of trade, net factor income and net cash transfers. The current account balance is one of two major measures of a country's foreign

Ø  Capital account : A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public and private international investments flowing in and

Ø   

Ø  Foreign exchange reserves : Deposits of a foreign currency held by a central bank. Holding the currencies of other countries as

Ø  Accounting equilibrium : the state of balance in the economy where supply equals demand or a country’s balance of payments is neither in deficit nor in excess. The state in which market supply and demand

Q3 Give introduction on foreign exchange. Explain on foreign exchange markets and role of international forex markets.

Answer :  Foreign Exchange

The exchange of one currency for another, or the conversion of one currency into another currency. Foreign exchange also refers to the global market where currencies are traded virtually around-the-clock. The term foreign exchange is usually abbreviated as "forex" and occasionally as "FX."

Q.4 Explain cash-in-advance and write the process of issuing letter of credit and different types of letter of credit.

Answer :  Cash in Advance

The cash-in-advance constraint (sometimes known as the Clower constraint after American economist Robert Clower)[1] is an idea used in economic theory to capture monetary phenomena. In the most basic economic

Q5 Explain the Foreign Direct Investment (FDI). Give the comparison between American Depository Receipt (ADR) and Global Depository Receipt (GDR). Write the categories for trade blocs.\

Answer: Foreign direct investment (FDI) is defined as a company from one country making a physical investment into building a factory in another country. It is the establishment of an enterprise by a foreigner. FDI includes investments made to acquire lasting interest in enterprises operating outside of the economy of the investor. FDI relationship consists of a parent enterprise and a foreign affiliate which together form an international business or a multinational corporation (MNC). In order to qualify as FDI the investment must afford the parent enterprise control over its foreign affiliate. The IMF defines control

Q. 6 Write down the differences between GATT and WTO. Explain the problems and achievements of GATT & WTO.

Answer: Difference between WTO and GATT:-

The World Trade Organization is not a simple extension of GATT; on the contrary, it completely replaces its predecessor and has a very different character. Among the principal differences are the following:

The GATT was a set of rules, a multilateral agreement, with no institutional foundation, only a small associated secretariat which had its origins in the attempt to establish an International Trade Organization in the 1940s. The WTO is a permanent institution with its own secretariat.

The GATT was applied on a “provisional basis

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