Challenges in Finance - 2
Challenges to Financial Sector in General
& Banking Industry in particular.
Facing intense National & International
=> Sustain, grow & retain market share;
safeguard against take-over & mergers.
Manage with shr
Evolved in response to the dire necessity
Stability of Exchange Rate &
Availability of adequate International
July 1, 1944 Brettonwoods Agreement.
Fixed Parity of global currencies against
UNIT 3 DETERMINANTS O F INTEREST
3 .0 Objectives
3 .1 I ntroduction
3 .2 Pure Interest and Gross Interest Rates
3 . 3 Bond Price and Yield to Maturity
3 .4 The Term Structure of Interest Rates
3.5 Factors Affecting Market Interest Rates
Foreign Exchange Market:
a) The foreign exchange market provides the physical and institutional structure through which
the money of one country is exchanged for that of another country, the rate of exchange between
currencies is determined, and
Current Exchange Rate
Per US Dollar
Hong Kong Dollar
Hedging means reducing or controlling risk. This is done by taking a position in the futures
market that is opposite to the one in the physical market with the objective of reducing or
limiting risks associated with price changes.
Hedging is a two-step pr
Human Life Cycle
Value of Money over time
Impact of inflation on monthly
An Introduction to Bonds
Debt markets specialize in the buying and selling of debt securities.
To illustrate how debt markets look, we will analyze a short example .
Suppose that HT Manufacturing Company needs new
equipment for its operations. Mos
Objective is to expose the students to various components of
the national budget and how theses impact the business
What is Capital Account ?
Represents any transaction that
involves a claim by one
national on another.
What is C A C ?
CAC means the right of
an individual to move
foreign currency in and
out of the country.
Challenges in Finance
The approach of developing
countries to the General
Agreement on Trade in Financial
Services (GATFS) under World
Trade Organisation (WTO) is
marked by caution and care. In
this connection question
Implications of sliding
rupee on following
No foreign currency loan
Earnings of the company around 65
percent of the total revenues for F.Y 2011
Estimated growth in revenues 27 per cent
as compared with the previous ye
Inelastic nature of our imports
Rising prices of commodities Gold and
India largest importer of gold accounting
for 1/3 of total global demand for gold.
Gold import bill
Times, Oct. , 2011
Export Boom Puzzle
Global environment of business gloomy.
Indian exports growing 38 percent in 20102011.
During 2011-2012 upto Sept. 211, the
export growing 46.4 percent in June, 2011,
81% in July 2012 and 44% in August,
Myths/ reasons about
Recent disturbance in rupee value due to
Rupee worse performing currency among
the emerging market economies
Reasons for rupee depreciation
Similarity between current situation and
that of 1991 c
Capital structure theories
Prof. Meghana Patil
Concept of value of the firm
The value of the firm depends on the earning of the firm
& earning depends upon the investment decision
The earning of the firm is capitalized at the rate equal to
cost of capital
National Income Accounts
Current Account Deficit (CAD)
Management of CAD
Management of CAD
income [ (NI) Y ] in the economy
Y = Cp + Cg + Ip + Ig + X => (1)
Where Y = National Income
Cp = Private Consumption
( 2006 )
The Capital Account
Convertibility (CAC) be done in
a phased manner with an outer
limit of financial year 2011.
Other Key Recommendations
i) Raising overal ceiling of $
18 billion place