Discuss the role of financial management in an international setting with particular reference

| June 14, 2018

(a)Discuss the role of financial management in an international setting with particular reference to: (i)Currency exchange rates. (4 marks) (ii)Sources of finance (4 marks) (iii)Investing in overseas countries. (4 marks)(b) A Kenyan import-export merchant was contracted on 31 December 2002 to buy 1,500 tonnes of a certain product from a supplier in Uganda at a price of Ush.118,200 per tonne. Shipment was to be made direct to a customer in Tanzania to whom the merchant had sold the product at TSh.462,000 per tonne. Of the total quantity, 500 tonnes were to be shipped during the month of January 2003 and the balance by the end of the month of February 2003. Payment to the suppliers was to be made immediately on shipment, whilst one month’s credit from the date of shipment was allowed to the Tanzanian customer.The merchant arranged with his bank to cover those transactions in Kenya shillings (Ksh.) on the forward exchange market. The exchange rates at 31 December 2002 were as given below: Ush.TSh.Spot1 month forward2 months forward3 months forward22.85 – 23.201.50 – 1.30 discount1.65 – 3.85 discount3.75 – 7.00 discount17.14 – 17.182.50 – 1.50 premium4.00 – 3.00 premium6.50 – 5.50 premium The exchange commission is Ksh.10 per Ksh.1,000 (maximum Sh.1,000,000) on each transaction. Required: Calculate (to the nearest Ksh.) the profit that the merchant made during the transaction. (8 marks) (Total: 20 marks)

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