Forward Rates Problems 1. A bank has to submit a quote to a customer for buying Euro against Rupees.

The customer will have the option of taking delivery any time during the second month. Given the following spot and forward rates, what rate should it quote? USD/INR Spot : 55.2 0/55.30 One month forward : 15/25 Two month forward : 20/30 EUR/USD Spot : 1.21/1.22 One month forward : 15/10 Two month forward : 20/15 2. A customer wants to sell a bill worth $ 1,000,000 to a bank. The bill might mature anytime during the second month. If the bank charges a margin of 0.5% and exchange rates are as given below, determine the rate which the bank is likely to quote. USD/INR Spot : 55.50/45.55 One month forward : 15/10 Two month forward : 20/15 3. In 1994, a bank agreed to sell FF 1,000,000 at Rs 14.89. On the date of delivery, the customer advises the bank to cancel the contract. At that point of time, the following rates were prevailing. Spot : USD/FRF : 3.52/3.53 USD/INR : 51.30/51.32 What cancellation charges should the bank levy? 4. A bank has to quote a rate to its customer for purchase of a demand export bill with transit period of 15 days. The interbank spot rate is Rs. 55.60 / $ and the one month forward rate is Rs 56.00 / $. If the exchange margin charged by the bank is 0.1% what rate should the bank quote? 5. A customer has approached a bank for buying a 30 day export bill for $ 100,000. The exchange margin applicable is .1%. If the transit period is 10 days and the exchange rates being quoted are as follows, what rate should the bank quote ? Spot : Rs 35.70 / $ 1 month forward : Rs 35.90 / $ 2 months forward : Rs 36.10 / $ 6. In 1995, the DM was quoting Rs 21.50 in the interbank market. If a bank charges 0.125% commission for TT selling and. 0.15% for TT buying, what rate would it quote to its clients? 7. On 3rd March 1998 the ruling rates were: Inter-bank Rs 38.8750/8850 You have been authorized to retain margin of 0.080% for a transaction involving inward remittance of US$ 100,000 value spot. In Rupee terms how much will your customer get and what is the effective exchange rate?

8. On 1st January 1998, you had purchased a demand bill for US$ 10,000 @ Rs 38.90 and the exporter was paid in Rupees immediately. The bill when presented o 10th January 1998 at Chicago was not honoured. The

advice of non-payment was received and conveyed to the exporter on 13th January 1998. The exporter requested that 1. the bill amount plus charges (Rs 250) be recovered from him 2. the bill be treated on collection basis and represented for payment 3. 5% rebate be allowed to the overseas importer. On 3rd February 1998 the bank in Chicago telexed having recovered and credited the proceeds less their charges US$20 with value date on 3rd February 1998. Meanwhile the market has moved and the TT selling rate on 13th January 1998 was Rs 39.05. The TT buying rate on 3rd February 1998 was Rs 38.85. 9. Your forex dealer had entered into a cross currency deal in the inter-bank market and bought DeM 500,000 at US$ 1 = DeM 1.8010 for spot delivery. However, the market turned volatile and therefore he squared up his position by disposing of DeM against US Dollar at the ongoing market rates. Assuming DeMs were quoted in the market as under: Spot US$ 1 =DeM 1.8100/10 If spot US$ 1 = Rs 38.8800/38.8900 in the local inter-bank market what will be the gain or loss in the transaction? 10. Messrs. ABC International offers your Delhi branch a sight bill for USD 258.000 on 28.01.2000 drawn under a letter of credit established by Amas Bank, General. Assuming the following, what IRS amount will you credit exporters account? Inter-bank USD 1 = Rs 46.84/85 Transit period 10 days. Interest Rate 11% p.a. Exchange Margin 0.15% Exporter being valuable client 0.50 paise better rate. 11. Canara Bank had purchased an export bill for USD 1,00,000 at Rs. 49.1600. The bill was unpaid on presentation and the customer authorized the bank to debit the bill amount to his account. Assuming the US dollar was quoted in the interbank market as Spot USD 1 = Rs 48.9500/ 9700 and the bank requires an exchange margin of 0.15% to be loaded on the exchange rate, what rate will it quote to recover its advance against the bill? What will be the profit or loss to the exporter on this transaction? 12. On 17th July USD is quoted in the interbank market as follows: Spot USD 1 = Rs. 48.6025/ 6100 Spot/July 500/ 600 /August 1500/ 1600 All Singapore, Malaysian Ringits are quoted as follows: Spot USD 1 = MTR 3.8012 / 59 1 month 24 / 26 2 months 48 / 50 The bank requires exchange margin of 0.10% on TT selling and 0.15% on bills selling. (i) Mr. Y.K. Kapoor requests for a bank draft for MYR 5,000 (ii) M/s Hightech Ltd. desire to retire an import bill for MYR 15,000. Calculate the exchange rate to be quoted by the bank in each of the above cases.