International Finance Question Paper
International Finance
Course:Master Of Business Administration
Institution: Kenyatta University question papers
Exam Year:2010
KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2009/2010
SPECIAL/SUPPLEMENTARY EXAMINATION FOR THE DEGREE OF
MASTERS OF BUSINESS ADMINISTRATION
BAC 601: INTERNATIONAL FINANCE
DATE:
Friday 24th September 2010
TIME: 2.00p.m – 5.00p.m
INSTRUCTIONS:
Answer ALL questions
Question 1:
a)
In Kenya, the interest rate is 7%, in Japan, the comparable interest rate is 2%. The spot rate for the Yen is Ksh. 0.00769. If the interest rate parity holds, what is the 90 day forward rate on the Japanese Yen? [10marks]
b)
A Kenyan firm plans to use a money market hedge to hedge its payment of DM 20000 for Germany goods in one year. The Kenyan interest rate is 7% while the German rate is 12%. The pot rate of the German DM is Kshs. 0.85 while the one year forward is 0.81. Determine the amount of Kenya shillings needed in one year if a money market hedge is used. [5marks]
Question 2:
a)
Capital flows usually represent direct foreign investments (DFIs) or Portfolio investments (DPIs). The flows resulting from these operations change the desire of firms to conduct business operations there;
i)
Explain the definitional difference between DFIs and DPIs. [3marks]
ii)
Analyse the factors that could affect a country’s appeal for direct foreign Investments. [3marks]
b)
Speculators sometimes put the currencies under severe pressure to be devalued wherever they mount a speculative attack. Citing two approaches you know, discuss the speculative attack. [9marks]
Question 3:
a)
Assume the Japanese government relaxes its control on imports of Japanese companies, other things being equal, how should this affect:
i)
Kenyan demand for Japanese Yen.
[3marks]
ii)
Supply of Yen for sale.
[3marks]
iii)
Equilibrium value of Yen.
[3marks]
b)
In the Mundell-Fleming model, under fixed exchange rate, what happens to production, exchange rate and the balance of payments if the world interest rates r* suddenly rises? [6marks]
Question 4:
a)
“Monetary approach to balance of payment theory is a modern version of the gold standard”. Discuss the statement. [9marks]
b)
Discuss how devaluation leads to “J-Curve” effect on the balance of payments. [6marks]
More Question Papers
Exams With Marking Schemes
Popular Exams
Mid Term Exams
End Term 1 Exams
End Term 3 Exams
Opener Exams
Full Set Exams
Return to Question Papers