1. Classify the following transactions as a current account or capital account t
ID: 1124841 • Letter: 1
Question
1. Classify the following transactions as a current account or capital account transaction. Justify your answer with reasons.(2 marks)
a) A Japanese insurance company purchases US Treasury bonds and pays out of its bank account kept in New York.
b) Suzuki Motors, Tokyo has invested in a joint venture with an Australian manufacturer in Sydney. This Australian joint venture has declared dividend and wants to transfer the dividend to Suzuki Motors Tokyo. Transfer of dividend on the investment will be treated as:
2. Please collect the latest data on our country’s foreign exchange reserve. This data should have the break up in billion (Bn). Data collected by you should have the date on which you have collected the data. (source : Reserve Bank of India web site: rbi.org.in) (2 marks)
3. During Aug 2013 USD/INR reached the level of 68. Subsequently Reserve Bank of India took some measures to bring down the volatility and Rupee came back to the level of 62-63. Please analyze the measures taken up by Reserve Bank. This information you can collect from any of the financial magazines or going through RBI website during that period. (4 marks)
Explanation / Answer
1) a) It is a capital account transaction.
Because a US treasury bonds is an asset for the US. And purchase and seling of assets and liabilities is under the capital account transaction . Therefore it is a capital account.
B) it is A current account transaction.
Because, transfer of dividend is a income payment. And income payment to foreign or income from foreign are under current account transaction.
2) please upload it again. Its against chegg policy
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