PROGRAM - MBA
SUBJECT CODE & NAME - MF0015 & INTERNATIONAL
FINANCIAL MANAGEMENT
1. Discuss the goals of
international financial management
Goals of international financial management
Effective
financial management is not limited to the application of the latest business
techniques or functioning more efficiently but includes maximization of wealth
meaning that it aims to offer profit to the shareholder, the owners of the
businesses and to ensure that they gain benefits from the business decisions
that have been made. So, the goal of international financial management is to
increase the wealth of shareholders just like in domestic financial management.
The goals are not only limited to just the shareholders, but also to the
suppliers, customers and employees. It is also understood that any goal
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2. In foreign exchange market many types of
transactions take place. Discuss the meaning and role of forward, future and
options market.
Forward Market
In the
forward market, contracts are made to buy and sell currencies for future delivery,
say, after a fortnight, one month, two months and so on. The rate of exchange
for the transaction is agreed upon on the very day the deal is finalized. The
rate of exchange for the transaction is agreed upon on the very day the deal is
finalized. The forward rates with varying maturity are quoted in the newspapers
and those rates form the basis of the contract. Both parties have to abide by
the contract at the exchange
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3.. Thousands of years back the
concept of bartering between parties was prevalent, w.hen the concept of money had not evolved.
Explain on counter trade with examples
Countertrade
Thousands of years ago,
the concept of bartering between parties was prevalent, when the concept of
money had not evolved. A person could give say 100 bags of wheat and get wood
or coal, a certain quantity for cooking. These bartering contracts were between
individuals or small kingdoms. Bartering exists today also but at different
level. For example, Iran may give 100 million barrels of oil to France and get
5000 guns of certain type in exchange. We can say that bartering is exchange of
goods between parties as per agreed terms without the use of money.
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4. There are different techniques of exposure management. One is the
Managing Transaction Exposure and the
other one is the managing operating exposure So. you have to explain on both
Managing Transaction Exposure and Managing Operating Exposure.
Techniques of Exposure Management
Managing Transaction Exposure
Transaction exposure
calculates gains or losses which occur after the current financial compulsions
according to terms of reference are resolved. Taken that the deal would lead to
a future inflow or outflow of foreign currency cash, any unprecedented
alterations in rate of exchange amid the period in which transaction is entered
and the time taken for it to settle in cash would guide to a change in worth of
net flow of cash in terms of the home currency. For example a transaction
exposure of an Indian company will be the account receivable which is
associated with a sale denominated in US dollars or the compulsion of an
account payable in Euro debt.
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5. There is a country risk
involved every time an MNC operates in a different country. Discuss the two
approaches to country risk management.
Approaches to country risk management
There are two
approaches to country risk management.
1.Defensive approach: In
this approach, the company tries to protect its interest by finding those
aspects of the company that are beyond the reach of the host government. This
reduces the firm’s dependence on the host country and the government of the
host country. The important strategies in the functional areas of the company
are discussed as follows:
Financial strategies:To
protect against the hostility of the host government, a company can take the
following steps:
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6. Write short note on:
a. American Depository Receipts(ADR)
b. Portfolio
a. American Depository Receipt (ADR)
It represents ownership
in the shares of a non-US company and trades in the American stock markets.
ADRs enable American investors to buy shares in foreign company without any
issue of cross-border and cross-currency transactions.
ADRs
carry price in American dollar, pay dividend in the same currency and can be
traded like any other share of US-based companies. Each ADR is issued by a US
depository bank and can represent one share. The owner of ADR has the right to
obtain the foreign stock it represents, but US investors are more interested in
owning ADR as they can diversify their investments across the globe. ADR falls
within the
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b. Concept of Portfolio
MNC makes two types of
investment decisions that are as follows:
•Portfolio investment
decisions
•Foreign direct
investment decisions
Portfolio is the
combination of assets so as to reduce the risk by diversification.
There are two major
types of risks that are as follows:
1.
Systematic risk: It is also known as market risk. It is the risk common to all
securities and all companies. These risks cannot be diversified away and some
examples are interest rates, recessions and wars. Technically speaking, it is
that part of the total variability of return caused by external variables such
as factors arising out of market, nature of industry and the state of economy.
These are the
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SUBJECT CODE & NAME - MF0016 & TREASURY
MANAGEMENT
1. Give the meaning of treasury
management. Explain the need for specialized handling of treasury and benefits
of treasury.
Treasury Management
Treasury management
is the planning,
organising and control
of funds required by a corporate
entity. Funds come in several forms:
cash, bonds, currencies, financial derivatives
like futures and
options etc. Treasury management covers all these and the
intricacies of choosing the right mix. According to Teigen Lee E, “Treasury is
the place of deposit reserved for
storing treasures and
disbursement of collected
funds”. Treasury management is one
of the key responsibilities of the Chief Financial Officer (CFO) of a company.
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2. Explain foreign
exchange market. Write
about all the
types of foreign
exchange markets. Explain the participants in foreign exchange markets.
Foreign Exchange Market
Foreign Exchange
market (forex market)
deals with purchase
and sale of foreign
currencies. The bulk
of the market
is “over the
counter” (OTC) i.e. not through
an exchange which is well regulated.
International trade
and investment essentially
requires foreign markets. Banks act as intermediaries and
perform currency exchange transactions by quoting purchase and selling prices.
In India
the Foreign Exchange
Management Act (FEMA)
1999 is the
law relating to forex
transactions and its
aim is to
develop, liberalise and promote forex market and its effective
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3. Write an overview of risk
mitigation. Explain the processes of risk containment. Write about the tools available
for managing risks.
Risk Mitigation
Risk mitigation can be
handed in four ways:
a) Risk
avoidance: We can
withdraw from an
activity perceived to be
risky, and elect not to go through with it.
b) Risk transfer: We can insure ourselves
against the risk and transfer it to another party called the insurer.
c) Risk
sharing: We can
disperse the risk
element in an
activity and reduce its impact,
by the use of derivative instruments,
d) Risk acceptance: We can build our competence
and capability to deal with the risk
by
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4. What is Interest Rate Risk Management
(IRRM)? Write the components and features of IRRM. Explain the macro and
micro factors affecting interest rate.
Interest Rate Risk Management (IRRM)
Interest Rate Risk is the
risk
·
to the earnings from an asset portfolio caused
by interest rate changes
·
to the economic value of interest-bearing assets
because of changes in interest
rates
·
to costs of fixed-rate debt securities
from falling bank rates
·
to impact of interest rates on cost of
capital used by the firm as hurdle rate for capital investment
Components of IRRM
IRRM can
be broken into
three parts: term
structure risk, basis
risk and options risk.
Term
structure risk also
called yield curve
risk is the
risk of loss
on account of mismatch
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5. Explain the contents of working capital. Write down the need for
working capital.
Contents of working capital
Working capital
comprises the working
assets of a
firm. What are these assets? Look at the items in these examples.
• A
trading business for
instance may have
to purchase and
store products to be
sold, paying for
them before they
can be sold
and cashed. A factory
that produces and
sells products has
to store raw materials and finished goods, besides
having some unfinished materials under process.
• A
company may also need to allow the customers to pay later instead of insisting
on
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6. Explain the concepts and benefits of integrated treasury. Explain the
advantages and disadvantages of operating treasury.
Concept and Benefits of Integrated Treasury
The concept of integrated
treasury works on the principle that Treasury can be a
single unifying force
of a company’s
activities in the
money market, capital market and
forex market; and can help the company derive synergy. Synergy is a powerful
advantage in business because it brings together two or more activity domains
and achieves a total effect that is greater than the sum of all the individual
domains.
Thus a
decision related to money market instruments, for example, is taken after
reviewing
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PROGRAM - MBA
SUBJECT CODE & NAME - MF0017 & MERCHANT
BANKING AND FINANCIAL SERVICES
1. Rating methodology is used by
the major Indian credit rating agencies. Explain the main factors of that are
analyzed in detail by the credit rating agencies.
The following are the main
factors that are analysed in detail by the credit rating agencies:
(i) Business risk analysis : Business
risk analysis focuses on analysing the industry hazards, market position of the
company, operating competence and legal position of the company. The industry
risk by taking into consideration various factors like strength of the industry
prospect, nature and basis of competition, demand and supply position,
structure of industry, pattern of business cycle etc. How the industry players
are competing with each other on the basis of price, product quality,
distribution capabilities etc are also analysed. Industries with stable
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2. Give the
meaning of the
concept of venture
capital funds. Explain
the features of venture capital fund.
Meaning of venture capital funds
Venture capital is the money
provided by investors to start firms and small businesses with long-term growth
potential. This is a very important source of funding for start-ups that do not
have access to capital markets. It typically entails high risk for the
investor, but it has the potential for above-average returns. Venture capital
can be defined as investment (long term) which is made in:
•
Ventures that are promoted by persons who though they
are qualified andtechnically sound but do not have any entrepreneurial
experience.
•
Projects which involves high degree of risk.
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3. Hire purchase
is one of
the important concept.
There are certain
features of hire purchase
agreement so explain the
points of it.
Differentiate between hire
purchase and leasing.
Concept of hire purchase
In a hire
purchase system, the buyer acquires the property by promising to pay in
monthly, quarterly and half-yearly installments. The period of payment has to be
fixed while signing the hire sale agreement. Though the buyer acquires the asset
after signing the agreement, the title of ownership remains with the vendor until
the buyer pays the entire liability. When the buyer pays the entire installment
and any other obligation according to hire purchase agreement, only then the title
of ownership of goods would be transferred to the hirer. If the hirer makes
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4. Explain the concept of
Depository receipts. Write down the difference between American Depository
Receipts (ADR) and Global Depository Receipts (GDR) also mention the issues
involved in ADR/GDR.
Depository Receipts
Depository receipts are
securities that are traded in foreign currency. These receipts are issued by
the foreign bank or institution which acts as a depository of shares issued by
a domestic company.
Depository receipts can be
classified into sponsored and unsponsored ones.
1.Sponsored depository
receipts:It is created by a single depository which is appointed by the issuing
company under rules provided in a deposit agreement. The issues of sponsored
ADR/GDR require prior approval of the Ministry of Finance.
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5. What is Online Trading? Explain
the process of online trading.
Measuring and explanation of Online Trading
Online trading is one of the
crucial financial services provided by financial institutions and merchant
bankers. For example, Indiabulls Securities Limited is one of India’s foremost
stock brokerage house having a pan India presence. The organization is a pioneer in providing
online stock trading platform in India and currently has a customer base of
seven lakh customers.
Online
trading is completed through Bombay Stock Exchange (BSE) and National Stock
Exchange (NSE). Market timings are 9 am to 4 pm and traders carry out trading
in these
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6. Write short notes on:
Depository Participants
Depository Participants
All the
functions performed by depositories are actually executed by the depository
participants (DPs). All activities related to recording of allotment of
securities, transfer of securities etc. are executed through depository
participants and no investor can directly open an account with a depository. A
depository can enter into an agreement with various depository participants who
would work as agents of the depository. Depository Participant works as an
intermediary between the investor and depository and they are called as agents
of
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PROGRAM - MBA
SUBJECT CODE & NAME - MF0018 & INSURANCE AND
RISK MANAGEMENT
1. Explain the risk management
methods.
The risk management
methods are as follows: -
1. Loss
control : The activities which decrease the expected cost
of losses by lowering the
occurrence of losses and/or their extent are referred as loss control.
Sometimes loss control is also termed as risk control. Usually, theactions
basically affecting the frequency of losses are referred as loss prevention
methods. Actions primarily influencing the severity of losses that do occur are
often called loss reduction methods. An example of loss prevention would be
routine inspection of aircraft for
mechanical problems. These inspections
help reduce thefrequency of crashes; they have little impact
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2. An organization is a legal
entity which is created to do some activity of some purpose. There are
elements of a
life insurance organization.
Explain the elements
of life insurance organization.
The important activities in a
life insurance company are:
• Procuring applications
or proposals from
prospective buyers of
life insurance
• Scrutinizing and
making decisions on the proposals for insurance. This is called underwriting.
• Issuing the policy
document, incorporating the terms and conditions of the insurance cover.
• Keeping track of the
performance of the insurance contract by either party, like payment of premium
or payment of benefits.
•
Attending to the various requirements that may arise during the duration of the
contract like
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3. Insurance is the most important
industry. Elaborate the different types of mediclaim and liability policies.
Types of mediclaim policies are as follows :
Individual mediclaim policy : Individual and group mediclaim
policies are similar in scope and nature. These policies provide for
reimbursement of hospitalization/domiciliary hospitalization expenses for
illness/disease suffered or accidental injury sustained during the
policy period.
The policy covers for
expenses incurred under the following heads:
(a) Room, boarding
expenses in the hospital/nursing home
(b) Nursing expenses
(c) Surgeon,
anaesthetist, medical practitioner, consultant, specialist fees
(d) Anaesthesia, blood,
oxygen, operation theatre
charges, medicines, diagnostic
materials, etc.
Expenses on
hospitalization for a minimum
period of 24 hours
are admissible. However, this limit is not applied to specific treatment
such as dialysis, chemotherapy, dental surgery, eye surgery, etc.,
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4. Give short notes on :
a) Pricing objectives.
b) Pricing elements.
c) Rate computation
Pricing objectives
I.
Rate adequacy : To avoid financial problems and insolvency, insurance
company rates must be adequate in
the light of benefits promised under
the company’s insurance products.
Rate adequacy means that for a given
block of policies, total payments collected now and in the future by the
insurer plus the investment earnings attributable to any net retained funds are sufficient to fund the current
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Pricing elements
The pricing elements
underlying the pricing of life and health insurance contracts are:
• expected mortality or
morbidity experience
• expected investment
return
• expenses
1. The probability of the insured
event occurring
It is
shown by mortality tables in life insurance and morbidity tables in health
insurance. The part of risk
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Rate computation
1. Yearly renewable term life
insurance
This plan
provides coverage for one year only but guarantees renewal irrespective of the
insurability of the policy owner. Premium depends on the rate of mortality. As
age increases, premium rate increases. Therefore, there is a possibility that
those in good health discontinue the policies because of
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5. Explain the creation
and application of
insurable interest. Give
the differences between wagering
and insurance.
Creation of insurable interest
There are a number of
ways in which insurable interest will arise or be limited:
(a) By common law: Where the essential elements of insurable
interest are automatically present, the same can be described as having arisen
at common law. The common law duty of care which one owes tothe other may give
rise to a liability, which again is insurable.
(b) By contract:
In some contracts a
person will agree to
be liable for something which he
or she would not ordinarily be liable for.
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6. Identify the role of insurance in managing risk financing. Explain the
importance of insurance transaction. Discuss in different perspectives of
insured and insurer.
Role of insurance in managing risk financing
Business
organizations and individuals take insurance policies. These insurance policies
help them to cover the losses in case of any emergency. Here, the idea is to
transfer the risk involved with the business to the insurance provider by
taking an insurance policy. This insurance policy will honour claims in case certain
emergencies disrupt the working of the organization. This type of financing
strategy offers the benefit of knowing that even if the project faces financial trouble due to unseen
events, the losses will be settled without having to use other company assets.
However, these events will have to be mentioned in the insurance papers that
the organization signs with the insurer. If an insurance policy
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