February 3, 2023

Marmara University
Faculty of Business Administration-Lifelong Learning Program
Department of Business Administration
Undergraduate Program 4th Year 7th Semester
Accounting and Finance Major Compulsory Course
FNCE 4047 International Finance-
ITM 441 Special Topics in International Finance
Makeup Exam

Compulsory Questions: (40 points)

1. Apple+ managers should not be held responsible for less global demand for streaming under
weaker pandemic conditions when exchange rates are moving unexpectedly (2) since during the
devaluation of the local currencies Apple’s local subsidiaries should have always operating loss and
transaction loss at the same time when Apple TV+’s competitors are raising subscription fees more
than Apple+ on video streaming services.

Shortly answer your friend, whether these statements are correct or wrong. (9 points)

2. This is a German firm exporting C vitamin food supplements to the Serbian customers through a
Serbian distributor.
Invoice Price of a C Vitamin food supplement of a German €6
Exporter
Sales Volume 135,000
Spot Exchange Rate (RSD/€) 117.40
Risk Sharing Band (RSD/€) 105.66- 129.14

By equal risk sharing of both parties beyond the band, calculate the cost of all exports of pairs of
glasses to the Serbian distributor on the Serbian Dinar (RSD) basis and the sales revenue of the
German firm on the Euro basis
a) at the spot exchange rate.
b) at the exchange rate (RSD/€)= 124.75
c) at the exchange rate (RSD/€)= 133
d) at the exchange rate (RSD/€)= 101.25
e) which party does benefit in these cases? (21 points)

3. Why can the decline in net worth stemming from an exchange rate crisis provoke a financial
crisis in emerging market countries? (10 points)
Part B) Elective Questions-60 points

Choose one question each from Pool 1, Pool 2 and Pool 3

Pool 1: Recent Developments in International Finance (20 points)

-Choose one among questions 4-6

4. Answer any two of your friend’s three claims below:

(1) Africans are working so hard and overpaying taxes in their countries that towards the end of their
lives they tend to migrate to other Africa countries not to pay taxes anymore.
(2) But they cannot easily get adapted to different living conditions in their new environment.
(3) So, young Africans who do not need migration to other countries due to their working online
globally are sending money to their old relatives in other countries.

5. Answer any two of your friend’s three claims below:

(1) Chinese regulators support big Chinese technology companies largely to get world leadership
in the artificial intelligence and cloud computing.
(2) So, data protection standards for consumers are missing in China in favor of big technology
firms.
(3) For that reason, internet companies and video gaming companies are also benefiting from this
policy.

6. Answer any two of your friend’s three claims below:

(1) Family members per household decreases largely with the death of old people and household
numbers are largely dependent on the early marriages, especially in population concentrated areas
(Table 1).
(2) The condominium prices are similar to those in other property types (1) (Table 2) and
(3) The condominium prices are determined by the building costs by the construction companies
rather than financial condition of buyers.

Table 1: Households Family Table 2: 2012 2015 2018

% Change Members Japan:
1970-2015 Per Residential
Household Property Price
Index
(2010=100)
Japan Average 76 -32 Residential 100 100 101
Land
Population 116 -28 Residential 100 104 110
Concentrated Property
Area
Other Areas 18 -32 Condominiums 104 120 140
Pool 2: Crisis Articles (Choose one among 7-9) (Each question 20 points)

7. From the IMF Working Paper about Global Financial Crisis briefly explain one of the alternatives:
a) Marginal Loans and Systemic Risk
b) Financial Integration and Interconnectedness

8. Here are given historical data of some crisis-stricken Eurozone countries before and at the
2008 global financial crisis. What is the relationship among 2000-2008 annual increase in bank
assets (% of GDP), bank assets 2008 and % debt-GDP ratio across countries? Do you agree that
all countries should be categorized as a single group?
Bank Assets (% of GDP)
2000-2008 Annual Bank Assets 2008 % Debt-GDP Ratio
Increase 2008
Greece 36 % 173 % 109
Italy 85 % 235 % 102
Belgium 83 % 392 % 92
Portugal 44 % 262 % 72
Ireland 464 % 783 % 43
Spain 121 % 296 % 39

9. Assuming that a Portuguese (in Country 1) purchases a washing machine from Germany
(Country 2) with the bill of 300, explain or draw T-accounts of the (1) current account transaction
and (2) current account transaction within the Eurosystem.
(You can use at most 5 parties: Country 1 Bank A, Country 2 Bank B, NCB1 (National Central
Bank Country 1), NCB2 (National Central Bank Country 2) and ECB (European Central Bank)

Pool 3: General Elective Questions (Choose one among 10-17) (Each question 20 points)

10. Spot Exchange Rate between Iranian Rial and Euro: IRR/€: 46,399.9875-46,401.8937
Interest Rates: One-Year IRR 22 5/8 – 7/8
One-Year € 4 3/8 – 1/2
What are the quotations for the one-year IRR/€ forward exchange rate?

11. 1) What is new tech cycle, (2) which roles are Asian countries playing in the new tech cycle?

12. a) Why are technology companies shifting their production away from China which is the most
dominant consumer electronics manufacturer?
b) How are India, Vietnam and Malaysia affected by this development?

13. Why do bondholders oppose to Prepa’s announcement of possibly not supplying electricity to
some parts of the Puerto Rico for four months after the hurricane? Are natural disasters or
operational/ financial reasons are mostly causing the electricity failure in Puerto Rico?

14. Why is McKinsey & Company blamed for “conflicts of interest” in the Puerto Rican bankruptcy
process of sales bonds tax? How can a judge decide in case of the conflicts of interest?

15. a) Comment on David Carden, a truck driver ‘s claim on the shortage of truck drivers in
Britain: “The general public haven’t appreciated this industry and the government hasn’t either.”
b) How did Brexit affect this problem?

16. a) Why has Estonia become favorite destination for British entrepreneurs after Brexit?
b) Which benefits Estonia is expecting from e-Residency of British entrepreneurs?
c) Comment on David Fortune, a former English policeman, now business owner’s view on the
Estonian e-Residency service: “I have nothing but praise for the people we have dealt with.
17. Here is given a balance sheet of an Czech subsidiary of a US parent company. Calculate
translation gain or loss under current rate method if the exchange rate changes from 20 koruna/US.
dollar to 24 koruna/U.S. dollar? (H denotes historical exchange rate, C denotes current exchange
rate). Since Cumulative Translation Adjustment (CTA) Account is not zero at the beginning, you
have also to calculate it before the devaluation happens.

Balance Sheet
Before Devaluation After Devaluation
Assets Czech Exchange Rate Translated Exchange Rate Translated
Koruna (CZK) (CZK/US$) Accounts (CZK/US$) Accounts
Statement US Dollars US Dollars
Cash CZK 13,500,000 19.50 (H) $ 19.50 (H) $
20.00 (C) 24.00 (C)
Accounts 75,600,000 19.00 (H) 19.00 (H)
Receivable 20.00 (C) 24.00 (C)

Inventory 21,600,000 18.00 (H) 18.00 (H)

20.00 (C) 24.00 (C)
Net Plant and 43,200,000 16.00 (H) 16.00 (H)
Equipment 20.00 (C) 24.00 (C)

Total CZK 153,900,000

Liabilities &
Net Worth

Accounts CZK 18,900,000 19.25 (H) 19.25 (H)

Payable 20.00 (C) 24.00 (C)
Bank Loans 54,000,000 18.75 (H) 18.75 (H)
20.00 (C) 24.00 (C)
Common Stock 30,000,000 12.50 (H) 12.50 (H)
20.00 (C) 24.00 (C)
Retained 51,000,000 15.00 (H) 15.00 (H)
Earnings 20.00 (C) 24.00 (C)
Cumulative -
Translation
Adjustment
Account (Loss)

Total CZK 153,900,000 $ $

Instead, the translation gain(loss) arising from the fall in the value of Czech Koruna can be calculated as follows:
Net Exposed Assets (US $)

Percentage Change in the Value of Czech Koruna

Increase in Translation Gain (Loss) after Devaluation of the Czech Koruna $