251424MG

Roll No………………………..
Course Code: 251424MG
Examination: APRIL-MAY 2023
Course: INTERNATIONAL FINANCIAL MANAGEMENT

Time Allowed: 3 Hours Maximum Marks: 80

Minimum Marks: 32
Note: Attempt all questions. Part (A) of each question is compulsory
and carries 4 marks; attempt any one part from part (B) and (C)
carrying 12 marks each.
Q1 A What do you mean by International Monetary 4
System?
B Define balance of payment. Why is it vital for a 12
nation? Explain the elements of Balance of Payment.
C Explain the scope of International Finance with 12
respect to nations and firms. What are the objectives
of domestic and overseas fiancé? Explain.
Q2 A What is a currency spot rate? Explain the two-way 4
quote.
B Explain the history, evolution and present structure of 12
foreign exchange market.
C Suppose you are a trader with 1 million USD and you 12
are provided with the following exchange rates:
EUR/USD: 1.1586
EUR/GBP: 1.4600
And USD/GBP: 1.6939.
Identify and exploit arbitrage opportunity.
Q3 A What are currency forwards? Explain the settlement 4
rule for currency forwards.

Page 1 of 2
 251424MG
B What is purchasing power parity theory. What are the 12
dynamics of relative purchasing power parity theory?
Explain with hypothetical example.
C Calculate the outright forward rate with following 12
details –
(i)EUR/USD Spot: 0.8650/0.8655
3 months SWAP 12/8. Is EUR at forward premium or
discount? Explain.
(ii)USD/AUD Spot: 1.8560/1.8570
2 months SWAP 15/20. Is USD at forward premium
or discount? Explain.
Q4 A What are currency futures? 4
B Explain the features of currency futures contract. 12
Why are futures used to hedge payables and
receivables?
C An Indian firm acquired goods worth USD 80,000, 12
credit period six months and payment due in USD.
The spot rate is USD/INR 84. The firm is willing to
hedge its exposure using futures which are at a price
of USD/INR 85. On maturity, the spot rate is 86.40
and futures are at 86.25. Will the hedge work?
Q5 A Define Currency Options. 4
B “Essential currency option elements include a strike 12
price, expiration date, contract size, and premium”
Explain for Call and Put option.
C Show graphically when will be a Call and Put option 12
In-the-Money, At-the Money and Out- of -the Money
with the help of hypothetical example.

Page 2 of 2
 251424MG
Roll No………………………..
Course Code: 251424MG
Examination: APRIL-MAY 2023
Course: INTERNATIONAL FINANCIAL MANAGEMENT

Time Allowed: 3 Hours Maximum Marks: 80

Minimum Marks: 32
Note: Attempt all questions. Part (A) of each question is compulsory
and carries 4 marks; attempt any one part from part (B) and (C)
carrying 12 marks each.
Q1 A What do you mean by International Monetary 4
System?
B Define balance of payment. Why is it vital for a 12
nation? Explain the elements of Balance of Payment.
C Explain the scope of International Finance with 12
respect to nations and firms. What are the objectives
of domestic and overseas fiancé? Explain.
Q2 A What is a currency spot rate? Explain the two-way 4
quote.
B Explain the history, evolution and present structure of 12
foreign exchange market.
C Suppose you are a trader with 1 million USD and you 12
are provided with the following exchange rates:
EUR/USD: 1.1586
EUR/GBP: 1.4600
And USD/GBP: 1.6939.
Identify and exploit arbitrage opportunity.
Q3 A What are currency forwards? Explain the settlement 4
rule for currency forwards.

Page 1 of 2
 251424MG
B What is purchasing power parity theory. What are the 12
dynamics of relative purchasing power parity theory?
Explain with hypothetical example.
C Calculate the outright forward rate with following 12
details –
(i)EUR/USD Spot: 0.8650/0.8655
3 months SWAP 12/8. Is EUR at forward premium or
discount? Explain.
(ii)USD/AUD Spot: 1.8560/1.8570
2 months SWAP 15/20. Is USD at forward premium
or discount? Explain.
Q4 A What are currency futures? 4
B Explain the features of currency futures contract. 12
Why are futures used to hedge payables and
receivables?
C An Indian firm acquired goods worth USD 80,000, 12
credit period six months and payment due in USD.
The spot rate is USD/INR 84. The firm is willing to
hedge its exposure using futures which are at a price
of USD/INR 85. On maturity, the spot rate is 86.40
and futures are at 86.25. Will the hedge work?
Q5 A Define Currency Options. 4
B “Essential currency option elements include a strike 12
price, expiration date, contract size, and premium”
Explain for Call and Put option.
C Show graphically when will be a Call and Put option 12
In-the-Money, At-the Money and Out- of -the Money
with the help of hypothetical example.

Page 2 of 2