How Are the Iais Principles Met with in the Mauritian Legislation on Insuranc

UNIVERSITY OF MAURITIUS FACULTY OF justness AND MANAGEMENT SECOND SEMESTER EXAMINATIONS MAY 2009 PROGRAMME BSc (Hons) Accounting with finance train 3, 4 BSc (Hons) finance Level 3 BSc (Hons) pay with Law Level 3 MODULE NAME DATE International Finance Wednesday MODULE CODE DFA3006Y(5) 6 May 2009 TIME 9. 30-12. 30 Hours NO. OF QUESTIONS SET 6 succession NO. OF QUESTIONS TO BE ATTEMPTED 3 Hours 4 INSTRUCTIONS TO CANDIDATES This paper consists of SIX Questions and you are need to answer ANY FOUR (4) Questions International Finance DFA3006Y Question 1 a) (i) Explain the term distant exchange exposure in relation to the operations of a multinational enterprise. 5 label ( ii ) How are such exposures usually handled by management? 9 marks (b) Seattle Inc is a medical device manufacturer. The companys annual gross revenue of $ 40m have been growing rapidly, and working capital financing is a common source of concern. The Chief Finance Officer, Martin Bell has recently been approa ched by one of the companys major Nipponese customers, Yosaka, with a parvenue payment proposal. Yosaka typically orders ? 12. million in product every other month and pays in Japanese yen. The current payment terms extended by Seattle Inc are 30 days, with no discounts given for earlier or cash payment. Yosaka has suggested that it would be willing to pay in cash (in Japanese yen) if it were given a 3. 0 % discount on the purchase price. On the basis of the information below Spot commit 30-day before rate 90-day forward rate 180-day forward rate ? 96. 60/$ Yosakas Weighted come cost of capital ? 99. 08/$ Seattle Inc Weighted average cost of capital ?100. 42/$ ?103. 56/$ 9. 00% 11. 95% give the sack Martin Bell on Yosakas proposition, assuming that Seattle Inc hedges all its foreign currency transactions. (c ) 8 marks Calculate the rate of forward premium of the US $ on the 180-day forward rate. 3 marks Total marks 25 Page 1 of 3 International Finance DFA3006Y Question 2 Whe n the financial systems fail, everyone suffers Edward Carr, The Economist. (a) Explain the importance of regulations in a financial system. 15 marks (b) In the waken of the financial crisis that has shaken America and Europe, do you think regulators have failed in their role? 10 marks Total marks 25 Question 3 (a) Briefly outline the disadvantages of a fixed exchange rate government activity? 6 marks (b) Explain the following terms (i) Special Drawing Right ( SDR ) ( ii ) Currency board constitution ( iii ) Euro currency ( iv ) Dollarisation 12 marks (c) The Thai baht was devalued by the Thai government from Bt 25/$ to Bt 29/$ in July 1997. Calculate the devaluation of the baht against the US dollar 3 marks (d) Explain the difference between devaluation and disparagement of a currency. 4 marks Total marks 25 Page 2 of 3International Finance DFA3006Y Question 4 (a) Do you think waive world(prenominal) capital mobility is desirable for emerging economies? 15 marks (b) Explai n how an active secondary market for securities can be beneficial to ( i ) lenders ( ii ) borrowers 10 marks Total marks 25 Question 5 (a) Outline the main abstract statements of the balance of payments accounts and explain briefly their economic significance. 10 marks (b) How can flows of laundered money from drug trade or international terrorist activities find their way into the Balance of Payments? 5 marks (c)How can such illegal flows be avoided if a country wants to be perceived as a clean financial centre? 10 marks Total marks 25 Question 6 (a) As a firm evolves, domestic operations are no longer adequate to sustain boost development, and the firm seeks other avenues of growth. Outline the considerations that need to be taken if the firm is contemplating a strategic coalescence with a foreign partner. 15 marks (b) Explain the difference between internal financing and external financing for a foreign subsidiary and give two examples of internal financing. 10 marks Total m arks 25 -END OF QUESTION PAPER- Page 3 of 3