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MASTER OF BUSINESS ADMINISTRATION – GLOBAL FINANCE

University

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Subject

MASTER OF BUSINESS ADMINISTRATION

Module Code

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GLOBAL FINANCE

1. Explain how financial intermediaries are able to profitably reconcile the
conflicting preferences of deficit and surplus spending units and comment briefly
on the extent to which financial intermediation supports a country’s economic
growth. Give examples to support your answer.
References
Kidwell et al. (2012) Financial Institution, Markets and Money, Wiley, Chapter 1, and
references therein. *
Allen and Santamero “What do Financial Intermediaries do?”, Journal of Banking and
Finance, 25, 271- 294. *
2. In what circumstance would a country’s central bank want to raise its core
interest rate? How would it achieve its desired rate and how would the
transmission of the rate change help move the country’s inflation rate closer to its
target rate?
Where appropriate, make use of diagrams and equations in your answer.
References
Mishkin, Frederic S. 1995. "Symposium on the Monetary Transmission
Mechanism." Journal of Economic Perspectives, 9 (4): 3-10.DOI: 10.1257/jep.9.4.3 *
Kidwell et al. (2012) Financial Institution, Markets and Money, Wiley, Chapters 2&3, and
references therein.*
3. Explain how Multinational Corporations use derivatives to manage the threat
exchange rate volatility poses to their profitability. Give numerical examples to
support your explanation.
References
Kidwell et al. (2012) Financial Institution, Markets and Money, Wiley, Chapter 11, and
references therein.*

Chapter 13 of “International Finance” by Pilbeam (2013), 4 th edition, and references
contained therein.

4. Referring to risk management in financial institutions, Kidwell et al. (2012, p30)
claim:
“Managers who take too few risks sleep well at night but eat poorly—their slumber
reaps a reward of declining earnings and stock prices that their shareholders will
not tolerate for long. On the other hand, excess risk taking—betting the bank and
losing—is also bad news. It will place you in the ranks of the unemployed with an
armada of expensive Wall Street lawyers defending you.”
One of the key risks faced by banks and other financial institutions is credit risk.
Explain what it is and why its management is important to lending institutions and
provide a detailed account of the risk management tools used by lenders as they
attempt to mitigate the dangers inherent in extending credit to households and
businesses.