How Are the Iais Principles Met with in the Mauritian Legislation on Insuranc
UNIVERSITY OF MAURITIUS
FACULTY OF LAW AND MANAGEMENT
SECOND SEMESTER EXAMINATIONS
MAY 2009
PROGRAMME
BSc (Hons) Accounting with Finance – Level 3, 4
BSc (Hons) Finance – Level 3
BSc (Hons) Finance 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
DURATION
NO. OF QUESTIONS TO BE
ATTEMPTED
3 Hours
4
INSTRUCTIONS TO CANDIDATES
This paper consists of SIX Questions and you are required to answer ANY FOUR (4) Questions
International Finance – DFA3006Y
Question 1
(a)
(i)
Explain the term “ foreign exchange exposure” in relation to the operations of a multinational enterprise.
[5 marks]
( ii )
How are such exposures usually handled by management?
[9 marks]
(b)
Seattle Inc is a medical device manufacturer. The company’s annual sales 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 approached by one of the company’s major Japanese customers, Yosaka, with a new payment proposal. Yosaka typically orders ¥12.5million 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 early 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 rate
30-day forward rate
90-day forward rate
180-day forward rate
¥ 96.60/$ Yosaka’s Weighted average cost of capital
¥ 99.08/$ Seattle Inc Weighted average cost of capital
¥100.42/$
¥103.56/$
9.00%
11.95%
Advise Martin Bell on Yosaka’s 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
FACULTY OF LAW AND MANAGEMENT
SECOND SEMESTER EXAMINATIONS
MAY 2009
PROGRAMME
BSc (Hons) Accounting with Finance – Level 3, 4
BSc (Hons) Finance – Level 3
BSc (Hons) Finance 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
DURATION
NO. OF QUESTIONS TO BE
ATTEMPTED
3 Hours
4
INSTRUCTIONS TO CANDIDATES
This paper consists of SIX Questions and you are required to answer ANY FOUR (4) Questions
International Finance – DFA3006Y
Question 1
(a)
(i)
Explain the term “ foreign exchange exposure” in relation to the operations of a multinational enterprise.
[5 marks]
( ii )
How are such exposures usually handled by management?
[9 marks]
(b)
Seattle Inc is a medical device manufacturer. The company’s annual sales 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 approached by one of the company’s major Japanese customers, Yosaka, with a new payment proposal. Yosaka typically orders ¥12.5million 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 early 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 rate
30-day forward rate
90-day forward rate
180-day forward rate
¥ 96.60/$ Yosaka’s Weighted average cost of capital
¥ 99.08/$ Seattle Inc Weighted average cost of capital
¥100.42/$
¥103.56/$
9.00%
11.95%
Advise Martin Bell on Yosaka’s 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