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International Finance FINAL EXAMINATION REVISION

International Finance FINAL EXAMINATION REVISION. Lecture 1. BOP Current Account Capital Account Change in Official Reserves. Lecture 2. 1. Factors Affecting International Trade Flows Inflation National Income Government Restrictions Exchange Rates

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International Finance FINAL EXAMINATION REVISION

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  1. International FinanceFINAL EXAMINATION REVISION

  2. Lecture 1 • BOP • Current Account • Capital Account • Change in Official Reserves

  3. Lecture 2 1. Factors Affecting International Trade Flows • Inflation • National Income • Government Restrictions • Exchange Rates 2. Factors affecting International Capital Flows • Factors Affecting DFI • Factors Affecting International Portfolio Investment

  4. Lecture 3 1. Motives for Using International Financial Markets • Motives for Investing in Foreign Markets • Motives for Providing Credit in Foreign Markets • Motives for Borrowing in Foreign Markets 2. International Financial Markets • Foreign exchange market • Euromarket

  5. Lecture 4 • Factors that Influence Exchange Rates • Relative Inflation Rates • Relative Interest Rates • Relative Income Levels • Government Controls • Speculating on Anticipated Exchange Rates

  6. Lecture 5 1. Government Intervention • Direct Intervention • Indirect Intervention 2. Intervention as a Policy Tool • Influence of a Weak Home Currency on the Economy • Influence of a Strong Home Currency on the Economy

  7. Lecture 6 1. Foreign Exchange Market 2. International Arbitrage • Locational Arbitrage • Triangular Arbitrage • Covered Interest Arbitrage

  8. Lecture 7 + 8 1. Parity Conditions • Interest Rate Parity (IRP) • Purchasing Power Parity (PPP) • International Effect 2. Comparison of parity conditions

  9. Lecture 9 • Motives for DFI • Revenue-Related Motives • Cost-Related Motives • Host Government View of DFI • Incentives to Encourage DFI • Barriers to DFI

  10. Lecture 10 • Political Risk Factors • Attitude of Consumers in the Host Country • Attitude of Host Government • Blockage of Fund Transfers • Currency Inconvertibility • War • Bureaucracy • Corruption

  11. Lecture 10 • Financial Risk Factors • Current and Potential State of the Country’s Economy • Indicators of Economic Growth • Types of Country Risk Assessment • Macro-Assessment of Country Risk • Micro-Assessment of Country Risk

  12. Lecture 10 • Reducing Exposure to Host Government Takeovers • Use a Short-Term Horizon • Rely on Unique Supplies or Technology • Hire Local Labor • Borrow Local Funds • Purchase Insurance

  13. Lecture 11 • Methods of Payment • Prepayments • Letters of Credit • Sight Drafts and Time Drafts • Consignments • Open Accounts

  14. Lecture 11 • Trade Finance Methods • Accounts Receivable Financing • Factoring • Letters of Credit • Banker’s Acceptances • Working Capital Financing • Medium-Term Capital Goods Financing (Forfaiting) • Counter-trade

  15. IF Final Examination120 minutes • Multiple Choices: 20 Qs 40 marks • Problems: 04 Qs 60 marks

  16. MCQ • Theoretical questions • Calculation questions • Change in the exchange rate • Bid-Ask spread • Forward premium/ discount • Cross Exchange rate • Change in the exchange rate with parity • Forward premium/ discount with parity • Country risk rating • Locational arbitrage profit • Triangular arbitrage profit

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