Finance of International Business Level: 7 CTEST 1 Module No: MBA7006

LEARNING OUTCOMES ACCESSED

  1. Identify and explain the functions of foreign exchange market.
  2. Understand the background of international monetary system.
  3. Examine the basic theories about exchange rate determination.

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Question 1.
Use the following spot and forward bid-ask rates for the U.S. dollar/euro (US$/€) exchange rate from December 10, 2010, to answer the following questions:



a. What is the mid-rate for each maturity? 20 Marks
b. What is the annual forward premium for all maturities?
20 Marks
c. Critically explain which maturities have the smallest and largest forward premiums? 10 Marks
TOTAL MARKS = 50
Question 2.
a. Critically explain with examples the Bretton Woods agreement and what was the foundation of the Bretton Woods international monetary system, and why did it eventually fail? 15 Marks
b. Explain with examples what are the advantages and disadvantages of fixed exchange rates? 20 Marks
c. Critically explain with examples what are some of the risks that come with the growing globalization of business?
15 Marks
TOTAL MARKS = 50
TOTAL MARKS = 100

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