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Fnmg 548:International Finance Management Question Paper

Fnmg 548:International Finance Management

Course:Master Of Business Administration

Institution: Kenya Methodist University question papers

Exam Year:2010

INTERNATIONAL FINANCIAL MANAGEMENT (FNMG 544/MSFI 514) 3rd Trimester 2010

FACULTY : BUSINESS AND MANAGEMENT STUDIES

DEPARTMENT : ACCOUNTING AND FINANCE

TIME : 3 HOURS

INSTRUCTIONS Answer Question ONE and any Other THREE Questions

Question 1

a) Assume the direct quote between the Kshs and $ is 1$ = Kshs.82 and that inflation rate in Kenya is 6% and that of U2A is 4%.

i) Compute the percentage change in the direct quote (3marks)

ii) Determine the new exchange rate (3marks)

b) Explain briefly four reasons that make knowledge of International Financial Management important to a Financial Manager. (4marks).

c) Assume that Kenya is experiencing a 12% interest rates and USA 7% interest rate, if the direct quote is 1$= Kshs.81.

i) Calculate the percentage charge in direct quote (3marks).

ii) Determine the new exchange rates (3marks).

d) You have been retained by the management of an international group to advice on the management of its foreign exchange exposure.

Required:

i) Explain the main types of foreign exchange exposure (4marks).

ii) Advise on policies which the corporate treasurer could consider to provide valid and relevant methods of reducing exposure to foreign exchange risk. (5marks).

Question 2

a) Foreign Ventures Ltd. is a multi-national company with a head office in London and many subsidiaries in Africa and Asia. A subsidiary in Africa is considering the possibility of raising funds either in the domestic market or in the foreign market using eurocurrency and eurobond markets.

Required:

i) What are the main features of the eurocurrency, eurobond and euroequity markets? (13marks)

ii) What factors will be relevant to the choice for a large multinational company between borrowing funds on the domestic market or the eurocurrency and eurobond markets? (12marks)

Question 3

a) What are financial futures? (3marks)

b) Explain how financial futures could be used as a tool of foreign exchange risk management and the limitation of such strategies. (12marks)

c) Explain five methods of professionalism that a country can employ for her local infant industries. (10marks)

Question 4

a) Explain five factors that influence a country’s exchange rates. (5marks)

b) Discuss the terms Globalization and Liberalization. Discuss the advantages and disadvantages of these terms to Kenya’s economy. (10marks)

c) An item currently costs 100in the UK. The current exchange rate is 1$= 1.50. The rates inflation are 2% P.a in UK and 4% P.a in the US.

i) What will be the price of the item in 1 year’s time in the UK and in the US.

ii) What will be the exchange the in 1 year’s time. (10marks)

Question 5

a) Explain five levels of economic integration and indicate which level East African Community. (5marks)

b) After the great depression of 1930and the destructive 2nd World War, the volume of international trade shrunk. This forced 45 countries of the world to assemble at Breton Woods conference in 1944, to discuss this problem. As a result of this conference two financial institutions were established. Explain five objectives of each of these institutions. (20marks)

Fnmg 548:International Finance Management Question Paper

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