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Internal Assignment Applicable for
SEPTEMBER 2018 Examination
Course: International
Finance
1. Raghu Steel Pvt. Ltd. is a leading steel company in India. The
company produces steel for the domestic market only. However the company
process the raw material from Indian suppliers onlyHowever, the CFO of the
company believes the company faces Forex risk. Justify his view (10 Marks) 2.
State Bank of India is the Official banker for Mansukh Pickle Wala Pvt. Ltd.
which is one of the largest exporters of pickles in Europe. The company has a
lag time of six months from the time it sells its product and collects the
money from the retailers in Euros. In order to reduce its currency risk the
company enters into an outright forward transaction with the bank. How can
State Bank of India mitigate its risk in the given case? (10 Marks)
3. Fears of a trade war heightened in March 2018 as the Trump
administration slapped trade sanctions on China, including restrictions on
investment and tariffs on $60bn worth of products. Fears of a trade war between
the two biggest economies in the world were also reflected in the bond market,
with US 10-year treasury bonds posting their biggest one-day drop in yields
since September. Further, bank and tech stocks also fell.
a) What are the various trade barriers that companies can resort to
under such situations? (5 Marks)
b) What is the impact of such trade barriers on global trade in general
and international financial markets in particular? (5 Marks)
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