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Ever Necessary 2. Support The Answers With Relevant Data and Country - Illustrations Where Ever Necessary

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JSS MAHAVIDYAPEETHA

SRI JAYACHAMARAJENDRA COLLEGE OF ENGINEERING MYSORE 570006


An Autonomous Institution under Visvesvaraya Technological University, Belgaum

4TH Semester MBA Degree EVEN SEMESTER JUNE 2011 Branch Section Date Duration of Exam Time : : 09MBA4F4 : : : : MBA COM M ON

SET 2

Name of the Paper Setter: Dr.(Mrs)Bettina .C.S

INTERNATIONAL FINANCIAL MANAGEMENT 3 hours 2.00 pm to 5.00 pm Maximum Marks: 100

Instructions to the Candidates: 1. Answers must be clear, complete, concise and comprehensive. 2. Mention the Section and corresponding Question Number boldly at the left hand side. 3. Depiction of Models must be neat and complete

Note: 1. Answers must be supported by graphs and arithmetical illustrations where ever necessary 2. Support the answers with relevant data and country - illustrations where ever necessary
Section A: Answer any 5 questions each carrying 3 marks 3X5 = 15 Marks

A1) Give a block diagram of the objectives of International Expansion. A2) Mention the pointers of a successful Joint Venture. A3) What are the three key components of financial account? A4) How does outsourcing affect balance of trade? A5) Mention the location of the four Biggest Foreign Exchange Market
A6) Mention the most frequently traded currency pairs

A7) What are Futures & Options? A8) What is Triffin Paradox?

Section B: Answer any 5 questions each carrying 7 marks

7X5 = 35 Marks

B1) Is ALL currency convertible? Explain B2) International movement of capital finds its origin in Product Life Cycle theory of Vernon. Explain B3) How do the unstable exchange rates impact balance of trade of a country. B4) Give a brief account on different foreign exchange instruments. B5) Analyse qualitatively the factors responsible for the deficits in balance of payments. B6) Suppose the Canadian spot exchange rate is 1.18 Canadian dollars per U.S. dollar. U.S. inflation is expected to be 3% per year and Canadian inflation is expected to be 2%. B7) Do you expect the U.S. dollar to appreciate or depreciate relative to the Canadian dollar? B8) What is the expected exch. rate in one year?

Section C: Answer any 5 questions each carrying 10 marks

10X5 = 50 Marks

C1) Briefly explain the structure of Foreign Exchange Markets C2) a. How do government controls affect exchange rates? b. Assume that Japanese government relaxes its controls on imports by Japanese companies. Other things being equal, trace the following: a. US demand for Japanese Yen b. Supply of Yen for sale c. Equilibrium value of Yen. C3) Critically examine the Purchasing Power Parity (PPP) theory C4) The stability of the U.S. dollar has made it the most widely traded in the world. Elucidate this statement C5) Explain the cash flow of an MNC with the help of a diagram. C6) Bring out the importance of transfer pricing from MNCs perspective

C7) Assume Aviva has contracted to sell 100 pairs of jeans per year to Britain at $ 24 per pair to buy 200 yards of denim from Britain in this same period for 2 per yard. Note that 2 yards of denim are required per pair and that the labour cost for each pair is $8. When at the time of contract, the exchange rate is S ($/) =1.5 and that the dollar is then devalued to S ($/F) =2.0, elasticity of demand for Aviva Jeans in Britain is -2 and that after the contract expires Aviva raises the price of jeans to $25 per pair. a. b. Calculate the gains/losses from the devaluation on the jeans sold and on denim bought at the contracted prices. Calculate the gains/losses from extra competitiveness of Avivas jeans from the operative exposure. a. US firms prefer to engage in Foreign Direct Investment (FDI)in Mexico rather than Canada b. US firms commonly use joint ventures as a strategy to enter China c. Europe is not considered as a location for FDI because of Euros value.

C8) Give reasons for the following:

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