International Finance Management - You Are Setting Up a Project in Usa. the Estimated Nfv Is 12 Million. Your Finance Officer Started in the Report That He Has Not Accounted for Foreign Exchange Risk

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International finance Management

1. ‘‘Centralized cash management is a double – edged sword for

international working capital management’’ – Discuss.

2. ‘‘Balance of payments always balances’’ – Comment.

3. How does the international Monitory fund raise the resources ? What

are special drawing rights? Breifly explain the funding facilities

provided by IMF to its member countries

4. How does international financial system differ from domestic

financial system?

5. What is infra-corporate transfer of fund? Explain the variable that

influence intra corporate transfer of funds.

6. Explain purchasing power parity and reason for its deviation. Also

discuss its applications.

7. Critically examine the impact of developments in the emerging

foreign exchange markets.

8. Consider the following data

Exchange Rate $ Interest Rate

£ Interest Rate Spot 1 $ 1,5753/ £ 1 month $ 1, 5623/ £ 3% p.a 8.5% p.a

3 months $ 1, 5577/ £ 3.5%

p.a 7.5% p.a 6 months $

1.5536/ £ 3.5% p.a 7% p.a

1) Find out the arbitrage possibilities for various periods.

2) Show how interest rate parity will be restored as a result of arbitrage activities.

9) You are setting up a project in USA. The estimated NFV is $12 million. Your

finance officer started in the report that he has not accounted for foreign exchange

risk. He felt that with such a large NPV, the project should be accepted since even a

risk adjusted NPV would likely be positive. You have the final decision as to whether

to accept or reject the project. What is you decision? Calculate the following rates

into outright rates: ii) Indicate their spreads