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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:2013

NTERNATIONAL FINANCIAL MANAGEMENT (MSFI 516) (FNMG 548) 1ST TRIMESTER 2013

KENYA METHODIST UNIVERSITY

SCHOOL OF BUSINESS AND MANAGEMENT

END OF SEMESTER EXAMINATION FOR MASTER IN BUSINESS ADMINISTRATION APRIL, 2013
UNIT CODE : MSFI 516/FNMG 548
UNIT TITLE : INTERNATIONAL FINANCIAL MANAGEMENT

TIME: 3 HOURS

Instructions: Answer Question ONE and Any other THREE Questions.

Question One

Assume direct quote between the Kenya shilling and US dollar is 1$ = Ksh 100 and that inflation rate in Kenya is 6% and that of USA is 4%.

Compute the percentage in the direct quote.

(3 Marks)

Determine the new exchange rates

(3 Marks)

Comment on the trend

(3 Marks)

(b) Explain briefly FOUR reasons that make knowledge of international
financial management important to a financial manager. (4 Marks)

(c) You have been retained by the management of a multinational corporation

to advise them on the management of its foreign exchange exposure.

Required:

Explain to them THREE types of foreign exposures.

(6 Marks)

Advise them on FOUR policies that the multinational corporation can adopt to reduce exposure to foreign risks.

(8 Marks)

(d) One of the arguments in favour of protectionism policy is to safeguard our local infant industries from collapse. Explain FIVE criticism of this reason for protectionism.

(e) Assume that Kenya is experiencing a 10% interest rates and UK 6% interest rate and the direct quote between the two countries 121$ = Ksh 150.

Calculate the percentage change in the direct quote.

(3 Marks)

Determine the new exchange rate

(3 Marks)

Comment on the trend

(2 Marks)

Question Two

XYZ International Company Limited is a multinational company with a head office in Washington DC and many subsidiaries in Africa, South America and Asia, a subsidiary in Kenya. Africa is considering the possibility of raising funds either in the domestic market or in the foreign market using Eurocurrency and Eurobond market.

Required:

What are the main features of the Eurocurrency and Euroequity markets.

(5 Marks)

Explain factors that multinational corporation consider before borrowing funds from either domestic markets or Eurocurrency /Eurobond markets.

(10 Marks)

Question Three

Two economies integrated are stronger than one. The spirit behind the East Africa community is to establish a strong economic bloc for the benefit of the residents/citizens of the countries involved. The benefits of such an integration cannot be over emphasized in terms instilling the spirit of competition thus availing to the residents a wide variety of goods.

Required:
(a) Using European Union as a benchmark explain FIVE stages of an economic integration. (5 Marks)

Explain the limitations inhibiting East Africa community from achieving full integration status (Level Five).

(10 Marks)

Question Four

Using the Kenya Shilling as a point of reference explain FIVE factors that influence a country’s foreign exchange rates.

(10 Marks)

An item currently costs £1.60 the rates of inflation are 5% in UK and 10% in the US.

Required:

What will be the price of the item in due years time the UK and in US.

(3 Marks)

Calculate the percentage change in exchange rates.

(2 Marks)

Determine the new exchange rates

(3 Marks)

Comment on the trends

(2 Marks)

Question Five

After the great depression of 1930’s and the destructive 2nd World War, the volume of international trade shrunk; this forced 45 (forty) countries of the world to assemble at the famous Bretton Woods conference of 1944 to discuss international trade. As a result of this conference two financial institutions were established. Explain FIVE objectives of each of these institutions.

(10 Marks)

(i)

Define the terms globalization and liberalization. (2 Marks)

Discuss the pro’s and cons of globalization and liberalization to a country’s economy.

(8 Marks)

Fnmg 548:International Finance Management Question Paper

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