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1.

Questions
Define Globalization. State its advantages &
disadvantages.

2.

Write a short note on


a. The Current Account
b. The Capital Account

3.

What do you mean by Swap? State its


features and also explains the kinds of
interest rate swap.

4.

Discuss the different types of Letters of


Credit.

5.

State the Translation method.

6.

Discuss the tools of Foreign Exchange Risk


Management.

4D15 MF0015

Answers
Definition: (1 mark)
Advantages: (6 marks)
Economic growth
Lower costs
Improved availability of goods and services
Incentives for research and adoption of innovations
Raise cheaper loans
Global prosperity
Disadvantages: (3 marks)
a. The current account: (5 marks)
Merchandise tyrade
Invisibles
Unilateral tranfers
b. The capital account: (5 marks)
Direct investment
Portfolio investment
Capital flows
Meaning: 2 marks
Features 3 marks
Types/kinds of interest rate swap
1. Plain vanilla swap
2. Forward vanilla swap
3. Callable swap
4. Putable swap
5. Extendable swap
6. Zero coupon for floating swap
7. Rate capped swaps
8. Equity swaps
1. Revocable letter of credit
2. Irrevocable letter of credit
3. Deferred payment letter of credit
4. Confirmed letter of credit
5. unconfirmed letter of credit
6. Revolving letter of credit
7. Transferable letter of credit
8. Back-to-back letter of credit
9. Anticipatory letter of credit
a. Current rate method
b. Non-current method
c. Monetary /non-monetary method
d. Temporal method
Tools of foreign exchange risk management
a. Forward contracts
b. Future contracts
c. Option contracts
d. Currency swaps

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