Wilson College International Finance Prelims Question Paper 2014


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INTERNATIONAL FINANCE
TY BMS   SEMESTER VI    PRELIMS 2014 – B
DURATION  2 HOURS     TOTAL MARKS  60
SECTION I IS COMPULSORY. ANSWER ANY THREE QUESTIONS FROM SECTION II.
SECTION 1
Q1. EXPLAIN THE FOLLOWING CONCEPTS: (15 MARKS)
1 Autonomous and Accomodating transactions
2 Pips and Points
3 Intervention Points
4 Money Changers
5 Tax Havens
Q2. a) Spot 1 USD = CAD 1.1238 (5 MARKS)
60 days forward 1 USD = CAD 1.1283
CAD interest rate = 3.6 % p.a.
USD interest rate = 3.00 % p.a.
Calculate Covered interest arbitrage
b) Analyse the following report and answer the questions given thereunder: (10 MARKS)
The Indian Economy has been on a roll over the past decade proving to the
world that it has developed into a very resilient economy capable of withstanding
both internal and external economic shocks. The speed of recovery of the economy
after the recession has shown that local consumption is strong and the need for
economic stimulus has passed.
The Partial Capital account convertibility has prevented flight of domestic capital
and infact the large investment flows received as FPI have appreciated the INR.
The mature reaction of the market to various changes taking place has reduced the
need for intervention. The market therefore has been able to find its own
equilibrium.
1) What is economic recession? Discuss.
2) Define convertibility in the concext of INR
3) What is FPI? What is the ‘Hot money’ feature associated with it?
4) Elaborate on Central Bank Intervention.
SECTION II
Q3. a) Distinguish between Direct and Indirect exchange rates ( 5 MARKS)
b) Describe the process of Loan Syndication ( 5 MARKS)
Q4. Describe in detail the steps involved in the issue of GDR’s (10 MARKS)
Q5. a) CAD / INR 32.7850 – 00
100 INR / CAD 3.0425 – 50
Calculate geographical arbitrage. (5 MARKS)
b) 73 days forward USD / CAD 1.1363
CAD interest rate: 3.6250 % p.a.
USD interest rate; 2.8750 % p.a.
Calculate spot USD / CAD rate. (5 MARKS)
Q6. a) Spot GBP / AUD 1.8755 – 65
GBP Interest rates: 3.20 – 3.45 %p.a
AUD Interest rates: 2.65 – 2.90 %p.a
Calculate 60 days forward quotation and Swap points. ( 5 MARKS)
b) Given the following options establish which currency would be used to invest
 INR 8 million for a temperory period of 6 months.
INR Interest rate: 4 %p.a
Currency:              Spot rate:                      Interest rate:                6 month fwd rate:
USD                          44.7535 – 85                       2.25 %p.a             45.1500 – 50
GBP                          78.7275 – 00                       3.50 %p.a             78.9400 – 50
CHF                          38.3525 – 55                       1.50 %p.a             38.8375 – 25 ( 5 MARKS)

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