International Finance Prelims Question Paper 2015- Jinall BMS Classes

JINALL BMS CLASSES

TOTAL MKS:75INTERNATIONAL FINANCE   TIME: 2.5HRS

Q1. Explain Any 5 of the following concept:                                                                   15 marks

1. Nostro and Vostro Account
2. Vehicle Currency
3. Managed float
4. Card and Ready rates.
5. Petrodollars
6. Authorised money changer
7. Call and put option

Q2 A. Spot GBP / SEK 9.9145                                                                                       5 marks

3 month Forward 9.9775

SEK Interest rate 3.60%p.a

GBP Interest rate 3.20%p.a

Calculate covered arbitrage

Analysis the following report and answer the following question. 10 marks

Company ‘K’ informed the National Stock Exchange in October 2011 that they would be issuing Foreign Currency Convertible Bonds (FCCB) of USD 10 each to International investors aggregating USD 200 million providing for conversion into 1 GDR of the company at the three years o refund of the principal amount of USD 10 at the option of the investors. The issue had a ‘Green shoe option’ of 15%. The issue was oversubscribed 8 times. The company therefore utilized the Green shoe option to the full extent in October 2014, at maturity, the rate for 1 USD was INR 62 and the stock price was INR 868.

1. Define FCCB’s.
2. Define Green shoe option. In what situation it can be exercised?
3. In view of the exchanged rate and the stock price at maturity, will the investor want conversion into GDR’s or would they want the principle?

Q3

9. Spot EUR/CAD9.3780 – 30 5 marks

DKK interest rate 3.70 – 4.00%p.a

EUR interest rate 1.20 – 1.50%p.a

Calculate 6 month forward EUR/CAD quotation.

Calculate 6 month forward swap point?

Spot USD / SGD 1.2690 – 10                                                                                       5 marks

SGD Interest Rate: 0.40 – 0.70 %  p.a.

USD Interest Rate: 1.25 – 1.50 %  p.a.

Calculate the 6 months forward USD / SGD quotation

Derive the 6 months forward swap points

C.Consider the following quotes :                                                                                              5 marks

Spot Pound = A$ 2.5120/2.6557

Spot NZ $ = Pound 0.2825/0.2975

(a)        Calculate the % spread on the Pound = A$ rate.

(b)        Calculate the % spread on the NZ $ = Pound rate.

(c)        The maximum possible % spread on the cross rate between the NZ$ and the A$.

OR

Q3 A. Distinguish between Gold Standard and the Bretton woods system of currency valuation.  7.5 marks

7. Define Balance of Payments (BOP) and discuss its components. 7.5 marks

Q4 A.Define ‘Depository Receipt’ and explain the steps involved in issue of the Global depositary Receipts                                                                                                                                 7.5marks

7. Distinguish between Foreign currency forward contract and option contract. 7.5marks

OR

Q4 A.Define the Role of the RBI in the Indian Foreign Market.                                                      7.5marks

7. Define Euro- currency market and enumerate the factors contributing to the growth 7.5marks

of this market.

Q5  Write Short note on Any 3 of the following.                                                                          15 marks

1. Arbitrage in foreign currency operation.
2. Smithsonian Agreement
3. Foreign Currency Convertible Bonds (FCCB)
4. European Central Bank (ECB)