International Business Finance

Chapter1

1. International Monetary Systems

a. International Gold Standard (SN)
b. Bretton Woods System of exchange rate (SN)
c. Discuss the meaning, features and need for International Monetary
System. What were the weaknesses of Bretton wood system?
d. “Gold standard provides price stability besides automaticity in exchange
rate and Balance of Payment Adjustment”. Discuss
e. Purpose of SDRs ( Special Drawing Rights)

2. International Financial Markets

a. What is Euro Currency Market? What is the importance of Euro market?
What are the factors responsible for the growth of Euro Dollar Market?
b. Explain genesis and relevance of Euro markets.
3. What is Euro bond? Discuss the various steps involved in the Euro bond issue.
4. Differentiate between Euro bond, foreign bond and domestic bond.
5. What are Euro notes? How are they different from Euro commercial papers?
Discuss their respective features.
6. GDRs & ADRs
7. Devaluation is the most effective remedy for correcting adverse balance of trade.
(SN)
8. Euro Commercial Paper (SN)
9. What are the advantages of Euro commercial paper? Explain how yield on a
commercial paper is calculated.
10. Commercial paper (SN)
11. Discuss the role of central banks in foreign exchange markets. Has it undergone
any significant change in recent years?
12. Examine the relative merits and demerits of FDI and Portfolio investment.
13. Explain the functions of SWIFT. What are its economic implications? How is it
different from CHIPS?
14. Discuss the different exchange rate of IMF
15. LIBOR
16. Explain the syndication of loan in the context of International Banking System.
17. What is loan syndication? Explain the process of loan syndication.
18. Discuss the concept of disequilibrium in balance of payments. What are the
measures usually adopted to restore the equilibrium? Explain.
19. Differentiate between balance of trade and balance of payment
20. Special drawing rights
21. Discuss the meaning and purpose of different money market instruments.
22. Explain the international money transfer mechanism.
Chapter 2

1. Explain the Purchasing Power Parity Theory. What is its relevance in explaining
changes in the exchange rate?
2. Explain the Interest Rate Parity Theory.
3. What is Translation Exposure? Explain Funds flow adjustment, money market
hedge and Exposure netting techniques to manage Translation exposure.
4. Money market Hedge (SN)
5. Explain the structure and functioning of Foreign Exchange Market in India
6. Explain the meaning and significance of Foreign exchange markets.
7. Participants of Foreign Exchange Market
8. What do you understand by translation exposure? How is it different from
transaction exposure? How is the translation exposure measured?
9. Discuss the various methods of translating functional currency into reporting
currency.
10. Translation and Transaction currency risk
11. What are the various hedging techniques of transaction exposure?
12. International Fisher Effect (SN)
13. What is economic exposure? How is it managed? Explain.
14. Illustrate with the help of an example how futures may be a good hedging
technique. Also explain how futures may not be good hedging techniques at
times.
15. Exchange rate quotation (SN)/ Foreign Exchange Quotation
16. Distinguish between Direct and Indirect exchange rate quotes. If the exchange
rate is Rs $44, how can it be quoted in indirect form?
17. Explain Bid and offer exchange rates. Find out the spread if the exchange rate is
Rs 44.00-44.10/US$.
18. What are the factors which influence movement in exchange rates? Is inflation an
important factor? If so how? Explain giving suitable illustrations.
19. Discuss the long term and short term strategies in forecasting exchange rates.
 20. Forward Purchase Contract (SN)
21. Forward contract or Forward rate agreements
22. What are the risks involved in domestic and Foreign financial markets
23. How do inflation rate and interest rate influence the spot exchange rate? Explain
them on the basis of PPP theory and fisher effect?
24. What are the different types of currency risks? Explain why we need to manage
these risks.
25. Explain three methods of managing currency risks.
26. Fixed and Floating Exchange Rates
27. Spot and forward rates
28. Currency options
29. Foreign Exchange Rate Intervention by Central Banks.
30. Explain different types of foreign exchange transactions.

Chapter 3

1. Rationale of Foreign Direct Investment. (SN)

2. How does Tax Policy impact foreign investments? Do accounting practices of
countries have any influences on it? Discuss.
3. Explain the various DCF and Non DCF techniques of international project
appraisal. Which of the techniques in your opinion is better and why?
4. MIGA (SN)
5. Explain the adjusted Present value approach in evaluation of investment
projects.
6. What do you mean by cost of capital? Why do we calculate the cost of capital?
Explain the CAPM model in relation to cost of capital.
7. Explain the various issues involved in international project appraisal
8. Explain the various ways of managing political risk by MNCs
9. Discuss the various methods of measuring political risk
10. Explain CAPM Model in relation to cost of capital.
11. What do you mean by weighted average cost of capital? Explain CAPM in this
connection.
12. What are the principal stages in the development of Multinational Corporation?
13. Explain the five criteria for a truly multinational corporation. Which criteria in
your opinion are most important? Explain.
14. Dividend valuation model for cost of equity capital
15.
Chapter 4

1. What are the different kinds of guarantee/bonds used in international trade?

How are they useful for both importer as well as exporter?
2. Explain the reasons for decentralized cash holding and positioning of funds by
the MNCs.
3. What are the differences and similarities between the gain from centralization of
cash management via pooling and gain via currency diversification?
4. What is forfeiting? Discuss its rationale and significance as an instrument of
international trade financing.
5. Explain the need and importance of International Cash Management. Discuss the
advantage of centralized cash management.
6. Explain briefly various international debt instruments
7. Counter Trade (SN)
8. Comment on the capital structure of a multi national firm
9. Foreign subsidiary capital structure.
10. Discuss the factors that influence the worldwide corporate capital structure.
11. Does the capital structure depend on the degree of development of financial
markets? Explain.
12. Explain the concept of Transfer Pricing. Why do the TNCs resort to such a
practice and why are the governments against it. Discuss in detail
Discuss the capital adequacy requirements and the role they play in avoiding
international banking risks.

What do you mean by Capital adequacy requirements? Explain the different items
included in Tier 1 and Tier 2 capital.

What is yield curve? What is its importance? Discuss its application in investment and
borrowing decisions.

Briefly explain techniques of project export financing

What do you mean by Project Exports? What are the benefits of project exports? What
specific risks there may be in Project Export Business?

What is prime lending rate? Explain two basic approaches to loan pricing.

Regional Financial Institutions

Nostro & Vostro Accounts

‘The principal problem in analyzing different forms of export financing is the

distribution of risk between the importer and exporter”. Analyze the following export
financing instruments in the respect:

a. Confirmed Irresistible Letter of Credit

b. Open account
c. Documents against acceptance
d. Advance payment
e. Document against payment
f. Consignment Sale