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IB0010—International Financial Management


Master of Business Administration- MBA Semester 4

MF0015/MBF404/IB0010—International Financial Management-4 Credits

(Book ID: 1759)

Assignment (60 Marks)

Note: Answer all questions (with 300 to 400 words each) must be written within 6-8 pages. Each Question carries 10 marks 6 X 10=60

Q1. Globalization is a process of international integration that arises due to increasing human connectivity as well as the interchange of products, ideas and other aspects of culture. Give brief introduction of globalization and identify its advantages and disadvantages.

Answer. Globalization refers to in which activities of large number of business enterprises is carried out in many different locations across national boundaries. It is much more than just importing or exporting from one country to another. True globalization involves one firm procuring form, manufacturing in, and selling in many different countries. There has been an increasing trend in the world towards globalization is characterized by trends such as:


Q2. Foreign exchange markets, where money in one currency is exchanged for another. Write the history of foreign exchange. Explain the fixed and floating rates and the advantages and disadvantages of fixed rates system.

Answer. The exchange of goods and services has been prevalent since thousands of years and a system of barter developed over the years as man looked for ways to fulfill his needs for different commodities and services. The initial exchange was limited to items of food and gradually as man explored, invented and traveled to distant land it became necessary to have a medium of exchange. This necessity led to the evolution of money.

The Evolution of money

Primitive societies used various commodities as a medium of exchange. These ranged from grain, shells, tobacco, rice, salt, ivory to cattle, sheep, skins and slaves. These were the


Q3. Swap is an agreement between two or more parties to exchange sets of cash flows over a period in future. What do you understand by swap? Explain its features, kinds of swap and various types of interest rates swap.

Answer. A swap is an agreement between two parties to exchange sequences of cash flows for a set period of time. Usually, at the time the contract is initiated, at least one of these series of cash flows is determined by a random or uncertain variable, such as an interest rate, foreign exchange rate, equity price or commodity price. Conceptually, one may view a swap as either a portfolio of forward contracts, or as a long position in one bond coupled with a short position in another bond. This article will discuss the two most common and most basic types of swaps:


Q4. International credit markets are the forum where companies and governments can obtain credit. Bring out your understanding on international credit markets and explain the two very important aspects of international credit market. Refer and give one example.

Answer. International Credit

One of the forms of the movement of monetary and material means in international economic relations. It is based on the temporary provision of financial and commodity resources by a creditor to a borrower on condition of repayment at a set time and with interest. International credit is closely linked to the formation and development of the world capitalist and world socialist economic systems. The essence, forms, and functions of international credit are determined by the socioeconomic conditions under which it is applied.


Q5. Cost of capital is the minimum rate of return required by a firm on its investment in order to provide the rate of return by its suppliers of capital. Describe the cost of capital across countries.

Answer. The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; however, because interest expense is deductible, the after-tax cost is seen most often. This is one part of the company’s capital structure, which also includes the cost of equity. A company will use various bonds, loans and other forms of debt, so this measure is useful for giving an idea as to the overall rate being paid by the company to use debt financing. The measure can also give investors an idea as to the riskiness of the company compared to others, because riskier companies generally have a higher cost of debt.


Q6. Explain the principles of taxation and double taxation. Give some important points on tax havens and its types.

Answer. Basic concepts by which a government is meant to be guided in designing and implementing an equitable taxation regime. These include:

(1) Adequacy: taxes should be just-enough to generate revenue required for provision of essential public services.

(2) Broad Basing: taxes should be spread over as wide as possible section of the population, or sectors of economy, to minimize the individual tax burden.

(3) Compatibility: taxes should be coordinated to ensure tax neutrality and overall objectives of good governance.

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