DIBM301 INTERNATIONAL FINANCIAL MANAGEMENT JULY-AUG 2025

Description

SESSION	JULY-AUG 2025
PROGRAM	MASTER OF BUSINESS ADMINISTRATION (MBA)
SEMESTER	III
COURSE CODE & NAME	DIBM301 INTERNATIONAL FINANCIAL MANAGEMENT

 

 

Assignment Set – 1

 

 

1. Explain Globalisation and write down the four phases of rapid globalisation across the world. 3+7

Ans 1.

Globalisation refers to the increasing interconnection and interdependence among countries through the exchange of goods, services, technology, capital, and cultural ideas. It has transformed the global economy into a unified market, breaking down geographical barriers and enabling the free flow of trade and investment. In essence, globalisation integrates national economies into a single global system, driven by advancements in communication,

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2. Describe the components of balance of Balance of Payments. 10

Ans 2.

Components of Balance of Payments

The Balance of Payments (BoP) is a comprehensive record of all economic transactions between the residents of a country and the rest of the world during a specific period, typically a year. It serves as an indicator of a nation’s financial stability and international economic position. The BoP shows how money flows in and out of a country, providing valuable insights for policymakers, investors, and economists. A well-balanced BoP indicates equilibrium between receipts from exports and payments for imports, whereas persistent

 

3. Write Short notes on:
4. International Fisher Effect
5. Purchasing Power Parity 5+5

Ans 3.

(i) International Fisher Effect (IFE)

The International Fisher Effect (IFE), developed by economist Irving Fisher, establishes a relationship between interest rates and exchange rate movements. It states that currencies with higher nominal interest rates are expected to depreciate compared to those with lower interest rates, assuming that the real rate of return is equal across countries. The IFE combines elements of the Fisher Effect and interest rate parity, linking inflation expectations,

 

Assignment Set – 2

 

 

4. Define value at risk and the various determinants of foreign exchange exposure. 3+7

Ans 4.

Value at Risk (VaR)

Value at Risk (VaR) is a statistical tool used to measure the potential loss in value of a financial asset, portfolio, or firm due to adverse market movements within a specific confidence interval and time frame. It represents the maximum expected loss that will not be exceeded with a given level of probability. In simpler terms, VaR quantifies how much a firm

 

 

5. What aggressive and defensive approaches can a firm use in hedging? 10

Ans 5.

Aggressive and Defensive Approaches to Hedging

Hedging is a fundamental technique used by firms to minimize financial risks arising from fluctuations in interest rates, commodity prices, and foreign exchange rates. In international finance, hedging strategies help protect firms from unpredictable currency movements that may affect cash flows and profitability. Depending on the level of risk tolerance, companies adopt either aggressive or defensive approaches to hedging.

Aggressive Approach to Hedging

The aggressive approach involves taking calculated risks to maximize potential gains while

 

 

6. Enumerate the various types of Double Taxation Avoidance Agreements. 10

Ans 6.

Double Taxation occurs when the same income is taxed twice—once in the country where it is earned (source country) and again in the taxpayer’s resident country. To prevent this, countries enter into Double Taxation Avoidance Agreements (DTAAs) that establish rules to allocate taxing rights and provide relief to individuals and corporations engaged in cross-border activities. DTAAs foster international investment by ensuring tax neutrality and