Fin 6644

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Corporate MBA - FINANCE 6644: Global Financial Strategy
August 2012

Final Exam Review Questions
Instructions

A. Please be concise and precise in your answers.

B. Practice answers for closed book, class room setting.

C. Suggested length: minimum one page [1.5 spacing]; maximum two pages per question.

D. You would answer 3 questions and 2 Problems in two hours in final exam.

Questions

1.Ethical Standards

a. Can a multinational firm adopt varying ethical standards [such as with regard to product safety (Pinto), employee benefits (Nike) and “kickbacks” to win business (HP)] in its global operations? Why or Why Not? Discuss in depth based on the goals of multinational corporations?

Based on country, culture, and standard….and why? Benefits, safety standards, etc

b. How do corporate governance and financial management differ for US based corporations and global multinational corporations?

(Read: Class notes and discussions)

2.Global Pricing Strategy

With the emergence of the Internet as a dominant influence in global markets, many anticipated that the “Law of One Price” for all products would evolve. However that did not materialize.

A. What is “Law of One Price”?. When would that exist globally? B. Identify the major pricing strategies/ methodologies of corporations in pricing products and services. Gulf Bank lecture: cost pricing, profit based pricing

C. Discuss the impact of the Internet on “Global Pricing Strategies” of firms with specific reference to ‘Internet Pricing’ and ‘Brick and Mortar pricing’.

Pricing of commodities should be uniform requirements, govt regulations, etc

Cost-based, competition-based, market based (6 different things /lectures)

Internet vs. brick and mortar, orientation ( cost oriented (brick n mortar) vs. competition and market oriented (internet)

Internet (dynamic, brick and mortar( static --Lack of crm

(Class presentation, notes, and presentation by Professor)

3.Triangular Arbitrage Strategy:

The following Quotations are available to you. (You may either buy or sell at the stated rates)

Singapore Bank: Singapore dollar quote for Korean Won Won714.00/S$

Hong Kong Bank: HK$ quote for Singapore dollarsHK$4.70/S$

Korean Bank: Korean won quote for Hong Kong dollarsWon 150.00/HK$

a. Assume you have an initial HK$1,000,000. Is triangular Arbitrage possible? If so, explain the Steps, and compute your profit?

b. What are the implications of trading spreads and commission costs for this profit?

Lower profit

(Read: Class notes, and problem presented in class)

4. Financial Institutions Muti-goal Optimization Strategy:

a.Identify the major ‘objectives’ and ‘problems’ in the management of financial institutions globally. What strategies do institutions use to meet these challenges?

b.How do regulators evaluate the financial institutions?

c.Why did ‘Virtual Banks’ fail? Discuss in depth. Based on this, What are the prospects for Mobile Banking worldwide in the forthcoming decade?

Profitability, liquidity, solvency… revelation..not one objective, but 3 objectives (multi-goal programming)

Generally use asset liability management approach

Evaluate: Capital assets management earnings liquidity sensitivity to interest rate changes Periodically visit banks rating them 1 to 5 (camel score 3.5 or higher—bad)

Banking model: net income = net interest + income – burden – lower losses – (1-t)

Internet banking burden much lower as compared to brick and mortar

Online banking did not materialize due to spending on security and fraud protection. Mobile – technology has a brand,...
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