Sample Paper

International Finance

GMBA April-2010 batch

Time: 90 Minutes

Marks: 40

Closed Books / Closed Notes / Closed Laptop

Professor Parmeshwaram

Part A (10*2 = 20 Marks)

Q1) What are the advantages and disadvantages of full convertibility for a corporate / company?

Q2) Country A wants to draw their SDR from IMF. What are the circumstances under which funds can be withdrawn from SDRs?

Q3) Explain the term ‘traditional exposure’. What will be the impact of this exposure to a corporate?

Q4) Your company has imported capital equipment. This import was covered under a documentary credit established by your bank which will be payable on 360 days credit. Due date for payment will be 15^th June 2011. This equipment is not performing as per the undertaking given by the seller in its commercial contract. Can you request your bank for stop payment of, as overseas seller has not fulfilled his contractual obligation?

Q5) Exim Bank United States has sanctioned a loan of USD 50 Mn to Banco De Oro Unibank, Philippines towards modernization of telecom services in Philippines. SINGTEL got this contract and executed this project in collaboration with Globe Telecom Inc. This funding arrangement is know as:__________

Q6) Define factoring services. How far this facility will be better than covering the risk through any credit insurance agency?

Q7) Explain the term ‘funding risk’ in loan syndication process.

Q8) Explain the term ‘covered arbitrage’ in forex transactions with example.

Q9) What are the factors a corporate will consider before finalizing medium / long-term loans?

Q10) Explain the terms ‘leads & lags’. How it will affect the inflow and outflow of a company?

Part B (10 Marks)

Q1) One of the leading companies in Singapore wants to plan their funding requirements. They will be requiring USD 200 mn towards capital expansion and USD 20 mn for their working capital expenses, which will be for their imports, and funding their export obligations. Explain stages of ‘loan syndication’ process.

Suggest appropriate funding arrangements for meeting their working capital requirements also. They will have more export orders from Europe.

Part C (10 Marks)

Q1) With the following market information, arrive at the forward differentials (Both Buy & Sell – Bid/Ask)

Currency	Spot
GBP/USD	1.6000/50
EUR/USD	1.3200/50

Present LIBOR and LIBID for 6 months: (Annualized)

Currency	Interest Rates
	LIBID	LIBOR
USD	2.50%	3.00%
EUR	2.00%	2.25%
GBP	3.25%	3.50%

Q2) One of the leading Singapore oil companies wants to raise a loan of USD 100 mn for 60 days for payment of their import bill. They have the option of borrowing in USD or JPY. From the following data, find out the best option. The company would like to cover their foreign currency exposure (360 days in a calendar year) (3 Marks)

	Spot	Forward Differentials for 60 Days	Interest Rates
USD/SGD	1.2880/90	20/25	USD 2.5%
USD/JPY	80.50/60	30/20	JPY 2.25%

Q3) One of the US firms has 90 days receivable of CHF 50 mn (inward remittance in CHF). They would like to convert this CHF into USD. This company has access to domestic as well as offshore markets. Inter-bank market rates are: (360 days in a calendar year) (4 Marks)

USD/CHF: 0.9870/80

90 days FWD differentials 30/20

Money Market	Bid/Offer
Interest Rate for USD	2.00/2.25
Interest Rate for CHF	1.25/1.50

a) By booking forward contract, how much SGD the firm will receive.

b) If the firm wants to opt for money route, will it be better option than booking forward contract.

Please work out and find out the better option.