PFA

PFA


1 OPEN UNIVERSITY of MAURITIUS INSTRUCTIONS TO STUDENTS for assignments: Read properly the mode of submission Please note that any assignment submitted after the deadline, marks will be deducted as per assignment submission procedure document. Format: Please follow the guidelines in the document “Guide to writing assignments” available on Moodle. You are required to conform to Harvard referencing style. Please include a bibliography at the end of your document. Plagiarism/collusion will be heavily penalised and may result in non-award of marks. POINTS TO REMEMBER WHEN SUBMITTING YOUR ASSIGNMENT: MODE OF SUBMISSION: 1. Turn in/ Hand in on Google Classroom – The link will be on Moodle (by or before due date) 2. Email Soft copy to [email protected] (by or before due date) The current penalty is 2% per day (weekends and public holidays included) for any assignment received after the due date which the tutor will deduct from the final mark. The Open University of Mauritius will not hold itself responsible or liable for the non-award of marks if you fail to submit the assignment as per the required mode of submission. 2 Module Name: International Finance Lecturer’s Name: Ms L.Gunnoo Date of Submission: 3rd session (16/10/2021) Total Marks: 30 marks Word limit: 1500-2000 Question 1 The World Trade Organization (WTO) is an intergovernmental organization that is concerned with the regulation of international trade between nations. The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 124 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. It is the largest international economic organization in the world. Mauritius is a member of the WTO since its foundation in 1995. Monitoring of national trade policies for all members is an important activity of the WTO. This exercise is carried out through the Trade Policy Review Mechanism (TPRM). The frequency of each country is reviewed varies according to its share of world trade. As a developing country, Mauritius is reviewed every 6 years. Critically evaluate the effectiveness of the WTO. (10 marks) Question 2 Birningham Ltd, a UK company, buys goods from Richards which cost 100,000 Reds (the local currency). The goods are re-sold in the UK for £32,000. At the time of the import purchase the exchange rate for Reds against sterling is 3.5650 – 3.5800. Required (a) What is the expected profit on the re-sale? (b) What would the actual profit be if the spot rate at the time when the currency is received has moved to: (i) 3.0800 – 3.0950 (ii) 4.0650 – 4.0800? Ignore bank commission charges. (6 marks) Question 3 Extract from:Financial Times;October 29 ,2012 The story: BMW Group, owner of the BMW, Mini and Rolls-Royce brands, has been based in Munich since its founding in 1916. But by 2011, only 17 per cent of the cars it sold were bought in Germany. 3 In recent years, China has become BMW’s fastest-growing market, accounting for 14 per cent of BMW’s global sales volume in 2011. India, Russia and eastern Europe have also become key markets. The challenge. Despite rising sales revenues, BMW was conscious that its profits were often severely eroded by changes in exchange rates. The company’s own calculations in its annual reports suggest that the negative effect of exchange rates totalled €2.4bn between 2005 and 2009. Explain the different types of foreign exchange risks faced by the BMW Group and the internal techniques that the group can use to manage/reduce such exposure. (14 marks)