Hoose any two of the following questions and submit a report on your findings with special reference to G20 summit.
FINANCIAL MANAGEMENT (FM 701)
Assignment carrying 30% of total assessment
Mode of assessment: Individual
Choose any two of the following questions and submit a report on your findings with special reference to G20 summit.
The coursework must be completed on an individual basis.
It should be in report format and each question must not exceed more than 1500 words.
03 April 2009International [Global] G20 Summit
After a week of intense negotiations preceded by any number of preparatory talks by numerous unknown officials across the globe, the shop window meeting that was the G20 summit finally came to a close yesterday. The summit was held in East London and featured 20 leaders from the largest economic powers on the planet. Hosted by the UK and chaired by the Prime Minister, Gordon Brown, the summit represented the final act of the negotiations designed to try and address some of the worlds most pressing problems, most notably the global economic slowdown.
The summits main outcomes were plans to stimulate global economic recovery and measures to deal with the perceived causes of the current economic problems. The leaders announced a package of measures which will cost $1.1 trillion (that is 1.1 with 12 zeros after it). Of this amount, $500 billion will be given to the International Monetary Fund (IMF) to lend to countries whose economies are in poor shape and a further $250 billion to provide overdraft facilities for nations to draw upon. $250 billion will be diverted to helping boost global trade and $100 billion is available for countries to borrow notably the poorest countries of the world. In addition the IMF will look to raise $6 billion by selling gold reserves which will provide further lending facilities to poor countries.
Other measures included plans to reform the banking system including greater control of hedge funds, stricter control on credit rating agencies, improved global accounting standards and a greater focus on the role of tax havens. There will be a series of efforts to adopt a common approach to so-called toxic assets across the world in an effort to get the global banking system to start lending money again seen as key to helping to end the recession. Perhaps predictably, global leaders hailed the meeting as a success and used terms such as Historicand phrases like A coming together of the world”.
Markets seemed to welcome the summit outcomes with all the main stock exchanges showing rises in excess of 2.5%. However, commentators are making it clear that the summit does not represent any quick fixes for the global economy and that there are still difficult times ahead. The large sums of money pledged at the summit and prior to it in the form of fiscal stimuli from governments around the world will take time to have any effect. To the ordinary person in the street in the UK, France, Germany, the US or anywhere else in the world, the coming and going at the summit will have little resonance if they are without a job or face the prospect of losing their job or house as a result of the global economic slowdown. For millions of people, the next few years will be difficult; it must be remembered, though, that for those in work and who are able to finance their home and lifestyle the recession is something that may prey on their minds but does not affect them in the same way as those who suffer directly.
The challenges for global governments is to now put the summit plans into practice and to monitor the extent of the effect of the measures on the global economy; do not expect anything too dramatic to happen soon!
Questions for the purpose:
1. Explain in detail how the international financial architecture has evolved over a period of time and its impact on the present financial crisis.
2. Write a detailed note on the present system of exchange rate followed by various countries (at least 4 countries of your choice). If you were an advisor what would be your recommendation to the G20 summit.
3. Explain in detail the following:
a) Purchasing power parity relationship
b) Interest rate parity relationship
c) Currency swap
Comment on their weakness or disadvantages with the present financial system.
4. Describe the types of exchange rate exposures and explain how they are managed. If you were an advisor what would be your recommendation to the G20 summit.
5. Why does cost of capital for MNCS differ from that of domestic firms? Explain giving examples. Give your recommendations with the present failures of MNCs to the G20 summit.
6. Why are China and India Emerging as attractive centres for foreign direct investment in recent years? How has the financial crisis affected the investment strategies? Discuss the trends with the help of past 5years data.
Note: Your work must be properly referenced. Any form of plagiarism (copying from textbooks, websites or other students without proper referencing) will lead to the award of zero marks. This time I will penalise the student whose work is plagiarised by other students. You must answer any two question to pass.
Your report should include the following for the purpose of assessment:
Research (20%) Students are encouraged to read as widely as possible as credit will be given for the research undertaken. All sources of reference should be properly acknowledged and all forms of plagiarism should be avoided. Please follow Harvard referencing.
Presentation (20%) Work should be presented in a professional and scholarly fashion. It should be word processed, and sections should be properly headed. Credit will be given for accurate spelling, correct use of punctuation and the avoidance of grammatical errors.
Structure (20%) All good pieces of writing have a beginning, middle and an end. The various components of the work should he arranged in a logical sequence, and fit together into a coherent whole. It can include Introduction, Underpinning knowledge, applied knowledge and conclusion.
Knowledge and understanding (40%) Students should use this exercise to acquire knowledge and understanding of the subject. All terminology used should be thoroughly and clearly explained.