MF0015 & INTERNATIONAL FINANCIAL MANAGEMENT

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 DRIVE summer 2017

PROGRAM Master of Business Administration- MBA

SEMESTER 4

SUBJECT CODE &

NAME

MF0015 & INTERNATIONAL FINANCIAL MANAGEMENT

1 Explain Globalization, Advantages of Globalization and Disadvantages of Globalization.

Explanation of globalization

Advantages of Globalization

Disadvantages of Globalization

Answer: Globalization can be defined as the process of international integration that arises due to

2 In foreign exchange market many types of transactions take place. Discuss the meaning and role of forward, future and options market.

Forward market

Future

options

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

3 Explain Swap, its features and types of Swap.

Explanation of Swap

Explanation on features of swap

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

4 Explain in detail the types of exposure and measuring economic exposure

Explanation on types of exposure

Explanation on 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

5 Elaborate on the tools of foreign exchange risk management and techniques of exposure management.

Explanation of the tools of foreign exchange risk management

Explanation on the 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

6 Write short note on:

a. Adjusted present value model (APV model)

b. Economic and political risk

Answer: 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 project’s present value

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