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International Finance Question Paper

International Finance

Course:Master Of Business Administration

Institution: Kenyatta University question papers

Exam Year:2008

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2007/2008
INSTITUTE OF OPEN LEARNING
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF MASTERS OF
BUSINESS ADMINISTRATION
BAC 601: INTERNATIONAL FINANCE

DATE: TUESDAY 8th JANUARY 2008 TIME: 8.00AM – 10.00AM
INSTRUCTIONS:
Answer ALL questions.
Marks allocated to each question are appropriately indicated.
Start each question on a fresh page.
Show all your workings.
Question 1
(a)
Explain the meaning of Balance of Payments and how the deficit in balance of payment of a country can be removed. (8 marks)
(b)
Discuss how devaluation leads to “J. Curve” effect on the balance of payments. (8 marks)
(c)
Why might a speculator prefer speculating on the futures market to speculating with forward contracts? (4 marks)

Question 2
(a)
Explain Dornbusch’s model of exchange rate “overshooting” and discuss its contribution to our understanding of floating exchange rate beahviour. (10 marks)
(b)
Describe privatization and explain its role in entrancing international capital flows. (5 marks)

Question 3
Explain how sterilization works in the case of imperfect capital mobility. Why is the balance of payment schedule horizontal in the case of perfect capital mobility? (15 marks)

Question 4
A recent shift in interest rate differential between the United State UK America and Kenya had a large effect on the value of Kenya shillings. However, the same shift in the interest rate differential between the United States and South Africa had no effect on the value of Rand. Explain why the effects may vary. (10 marks)

International Finance Question Paper

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