1. Which of the following statements are true (T) or false (F)? (1+1+1 = 3 marks)

a) Decentralized management style of subsidiaries increases agency costs by giving more control to subsidiary managers.

b) Square Pharmaceuticals Ltd. paid consultancy fees to a British consultant, should be included under current account as credit entry to BOP statement of Bangladesh.

c) Foreign Direct Investment is considered as a conservative approach that can be used by firms to penetrate foreign markets.

Conceptual Questions:

2. State the impact (with graphical representation) of the following situations on Demand for and supply of BDT and their ultimate impact on exchange rate of BDT. Assume that US is a major player in international business of Bangladesh and can have impact on exchange rate of BDT. (Consider Bangladesh as the home country)

The interest rate of US rose to 10%, whereas the interest rate of Bangladesh remained constant at 7.5%. (5 marks)

3. Briefly explain with an example, why MNCs pursue International business with the help of Product Cycle Theory. ) (4 marks)

Briefly explain with an example, why MNCs pursue International business with the help of theory of Competitive advantage. ) (4 marks)

Numerical Problems

4.If the direct exchange rate of the British pound is $1.39, what is the pounds indirect exchange rate? That is, what is the value of a dollar in euros? (1 mark)

If the direct exchange rate of the Chinese Yuan $0.15, what is the Yuans indirect exchange rate? That is, what is the value of a dollar in euros? (1 mark)

5. Assume Swedish Krona is worth $.12 and the New Zealand Dollar is worth $.70. What is the cross-exchange rate of the New Zealand Dollar with respect to Krona? That is, how many Krona equal one New Zealand Dollar? (2 marks)

Assume the Japanese yen is worth $.008 and Polands currency (the zloty) is worth $.17 and. What is the cross-exchange rate of the zloty with respect to yen? That is, how many yen equal one zloty? (2 marks)

6. You are the nance director of a MNC based in US. Today you are expecting to receive 20,000 as export receipt and you also will have to pay C$ 40,000 as import payments. You have asked for quotes from two major banks. The quotes given by them are as follows. ? (Answer should be based on only quantitative analysis)

Bank X:	Bank Y:
Bid/Ask Quotation for British pounds(): $1.50/$1.60	Bid/Ask Quotation for British pounds(): $1.55/$1.65
Bid/Ask Quotation for Canadian Dollars(C$): $.60/$.70	Bid/Ask Quotation for Canadian Dollars(C$): $.50/$.60

a) What will be your export proceeds and import payments in US dollars, if you choose Bank X? (2 marks)

b) What will be your export proceeds and import payments in US dollars, if you choose Bank Y? (2 marks)

c) As a nance director which bank should you choose and why? (1 mark)

You are the finance director of an MNC based in US. Today you are expecting to receive as export receipt C$ 80,000 and you also will have to pay 20,000 as import payments. You have asked for quotes from two major banks. The quotes given by them are as follows. ? (Answer should be based on only quantitative analysis)

Bank X:	Bank Y:
Bid/Ask Quotation for British pounds(): $1.50/$1.60	Bid/Ask Quotation for British pounds(): $1.55/$1.65
Bid/Ask Quotation for Canadian Dollars(C$): $.60/$.70	Bid/Ask Quotation for Canadian Dollars(C$): $.50/$.60

a) What will be your export proceeds and import payments if you choose Bank X? (2 marks)

b) What will be your export proceeds and import payments if you choose Bank Y? (2 marks)

c) As a finance director which bank should you choose and why? (1 marks)