AFF 5050 past exam paper (3)

Semester One Examination 2009

QUESTION 1

Excessive competition in the deregulated financial markets may have been the reason for recent global financial market turmoil. Do you agree with this statement? Why or why not?


5 marks


same as before

QUESTION 2
What are the major functions of international banks? Discuss.


Arrange trade financing


Arrange foreign exchange

Offer hedging services for foreign currency receivables and payables through forward and option contracts

Offer investment banking services

Offer commercial banking services



QUESTION 3
Drafts/Bills of Exchange are commonly used in international trade finance. Identify different types of draft and discuss their main features.


5 marks


Sight draft: when the shipment has been made, the draft is presented to the buyer for payment.


Time of payment: on presentation of draft

Goods available to buyers: after payment

Risk to exporter: disposal of unpaid goods

Risk to importer: relies on exporter to ship goods as described in documents

Time draft: when the shipment has been made, the buyer accepts the presented draft

Time of payment: on maturity of draft

Goods available to buyers: before payment

Risk to exporter: relies on buyer to pay

Risk to importer: relies on exporter to ship goods as described in documents





QUESTION 4
What are the major factors international banks should consider when selecting an organizational structure for their businesses in various countries?


5 marks


Host country’s banking law


-many countries prohibit or restrict entry of full-service foreign banks

Bank’s resource constraints

- Banks internal financial and human resources will limit possibilities

- Number of internationally experienced bank officers

Bank’s degree of commitment to new market

Tax consideration






QUESTION 5
Describe main features of a generic money laundering model and identify main sources of money laundering. Provide examples.


5 marks

same as before


QUESTION 6
What are Special Drawing Rights (SDR)? Explain the purpose of SDR and discuss how SDRs are used by the International Monetary Fund (IMF).


5 marks


SDR is an artificial international reserve created by IMF which is currency basket currently comprised of five currencies







QUESTION 7
It is common that international banks use country risk analysis when they do business in the current competitive global environment. Identify and discuss different components of country risk with examples.

same as before


5 marks


QUESTION 8
Discuss different payments methods used in international trade activities. Explain why international trade is important for international banks.


5 marks
same as before
about the question why international trade is improtant for international banks, this question can be answered from "off balance sheet profit profit" perspective.


QUESTION 9
What are the major risks bankers are supposed to assess when participating in project financing? Provide examples.
Resource risk- risk that oil, gas or minerals found will not be sufficient to service debt payments


Input risk- risk that resources to be used in project may be unavailable or cost too much

Completion risk- risk that project will be delayed indefinitely leading to cost overrun.

Market risk- demand for product will decline

Operating risk- once project begins cost will change or labour available changes

Force majenre- act of god affect project

Political risk- specifically relating to project

Regulatory risk- change of regulations change adversely to affect project

QUESTION 10

Regulating international banks is being regarded as a solution for unexpected bank failures. Discuss the appropriateness of current major regulatory organisations.


5 marks

sorry,