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International finance NMIMS Solve Assignment December 2021

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NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: International Finance
Internal Assignment Applicable for December 2021 Examination

Assignment Marks: 30

Instructions:
 All Questions carry equal marks.
 All Questions are compulsory
 All answers to be explained in not more than 1000 words for question 1 and 2 and for
question 3 in not more than 500 words for each subsection. Use relevant examples,
illustrations as far as possible.
 All answers to be written individually. Discussion and group work is not advisable.
 Students are free to refer to any books/reference material/website/internet for attempting
their assignments, but are not allowed to copy the matter as it is from the source of
reference.
 Students should write the assignment in their own words. Copying of assignments from
other students is not allowed.
 Students should follow the following parameter for answering the assignment questions.

1. A multinational company is looking to raise USD 50000000 for its expansion strategy
across different countries, where they are only present as of now. Based on their financial
capital structure, the HQ decides to go for funding by issuing bonds in the international
market. Describe the two broad categories of international bond markets. Briefly explain
For Theoretical Answer
Assessment Parameter Weightage
Introduction 20%
Concepts and Application
related to the question
60%
Conclusion 20%
For Numerical Answer
Assessment Parameter Weightage
Understanding and usage
of the formula
20%
Procedure / Steps 50%
Correct Answer &
Interpretation
30%
NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: International Finance
Internal Assignment Applicable for December 2021 Examination
the various types of bond instruments that the MNC can consider issuing in the
international bond market. (10 Marks)
2. A forex trader from Mumbai collects the below information regarding the exchange rate
between INR and USD:
Bid Price: INR / USD = 74.2400
Ask Price: INR / USD = 74.2500
You are required to help him with the below questions he has:
(a) What is the direct exchange rate of INR-USD for the trader?
(b) What is the indirect exchange rate of INR-USD for the trader?
(c) What is a cross rate? If the bid and ask rate for USD-EUR are available as USD
1.16776-1.16782/EUR, what would be the bid-ask rates for INR/EUR, using the crossrate method
(10 Marks)
3. Kine, fancy footwear manufacturing company has an obligation to pay MXN 14 million
in 30 days for a recent shipment from Mexico. The CFO of Kine is contemplating hedging
the company’s MXN exposure on this transaction. She collects the below information
regarding the interest rates and exchange rates, from her forex trader:
Spot Rate: MXN 20.08 / USD
Forward Rate: MXN 20.28 / USD
30-day Put Option on USD MXN 19.50 / USD: 1% Premium
30-day Call Option on USD MXN 20.50/ USD: 3% Premium
USD 30-day interest rate (annualized): 7.5%
MXN 30-day interest rate (annualized): 15%
You are required to answer the below questions to assist the CFO:
NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: International Finance
Internal Assignment Applicable for December 2021 Examination
a. What are the hedging options available to Kine? What is the hedged cost of Kine’s
payable using a forward market hedge and using a put option hedge? (5 Marks)
b. What is the hedged cost of Kine’s payable using money market hedge? (5 Marks)
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