INSTITUTE FOR TECHNOLOGY & MANAGEMENT PGDMFM 2012-2014 (1st Year

TERM-I (Sept.) EXAMINATION Subject: Forex Markets Date: !-"#- "$ T%&e: (Max 2hrs)

Marks :'"

I(struct%o(s :
$. . 4. 7. )art-A %s co&pu*sor+. Atte&pt a(+ t,ree -uest%o(s .ro& )art-/ 0 a(+ t1o .ro& )art-2 T,e a(s1ers s,ou*3 be spec%.%c to t,e -uest%o( Appropr%ate exa&p*es s,ou*3 be 5%6e( 1,ere6er (ecessar+. )*ease 1r%te 3o1( t,e -uest%o( (u&ber o( t,e a(s1er s,eet be.ore atte&pt%(5 %t.

)ART-A ( $ Mark .or eac, -uest%o() 1. Suppose RBI pursue a tight monetary policy. All else being equal, the impact of this policy was to __________ interest rates in the India relati e to those in !SA and cause the dollar to __________ against I"R. a. #ecrease, depreciate b. #ecrease, appreciate c. Increase, depreciate d. Increase, appreciate $. %he spot !S#I"R bid and as& rate is gi en as '(.)1$*+'(.)1*,. If the * month+ bid+as& in points are )*+'$, then what would be I"R!S# * month rate in outright quotations. a. '(.),(+'(.),-b. ,.,$1,'+,.,$1,) c. ,.,$1,)+,.,$1,' d. "one of these. *. A depreciation of the I"R refers to a .an/0 a/ 1all in the I"R price of foreign currency b/ Increase in the I"R price of foreign currency c/ 2oss of foreign+e3change reser es for the India. d/ "one of these Suppose spot !S#4I"R is '5.() ad 1 year !S interest rate is )6 while it is 116 in India. %he 1 year !S#4I"R forward rate is a. '$.$$ b. '$.$7 c. '7.'$ d. "one of these.
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INSTITUTE FOR TECHNOLOGY & MANAGEMENT PGDMFM 2012-2014 (1st Year )ART-/ 8.7. (A(s1er a(+ T,ree 8uest%o(s ) De.%(e Fore%5( Exc,a(5e a(3 Exp*a%( t,e .o**o1%(5 9 a. Nostro 0 :ostro Accou(ts b. D%..ere(t .ore%5( exc,a(5e sett*e&e(t &o3es c. Exp*a%( .ore%5( exc,a(5e &arket; &arket part%c%pa(ts 0 Fore%5( exc,a(5e Market Tra(sact%o( T+pes ( $" ) <,at 3o +ou u(3ersta(3 b+ For1ar3 2o6er= Exp*a%( 1%t, a3e-uate exa&p*es. ( $" ) <r%te s,ort (otes o( t,e .o**o1%(5 9 ( $" ) a. /%3 Rate 0 O..er Rate b. D%rect Rate 0 I(3%rect Rate c. 2us,%o( 0 Sprea3 3. O6erbou5,t 0 O6erso*3 )os%t%o(s <,at %s Der%6at%6e= <,o are t,e users o. Der%6at%6es= ( $" )

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<,at are t,e Der%6at%6e pro3ucts o..ere3 b+ ba(ks to 2orporates= <,at are t,e 5u%3e*%(es 0 re5u*at%o(s o. R/I %( t,%s co((ect%o(= ( $" ) )ART-2 (A(s1er a(+ T1o 9 Eac, -uest%o( carr+ ! &arks) th 8n 9uly 1' the following rates are quoted by a ban& as gi en in table below. :owe er a corporate customer wants to buy 1,,,,,, !S# on 8ctober $1st. %he ban& has to quote a forward rate for this date. Arri e at the rate by interpolation method.

Q.7

Cash/Swap rates in points !S#I"R Spot 1 ;onth $ ;onth * month ' months ;aturity #ate 9uly 1'th August 1'th September 1'th 8ctober 1'th "o ember 1'th Bid Rate '(.,($) 1*) 1', 15, 1() As& Rate '(.,(') 1*, 1** 1') 1))

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INSTITUTE FOR TECHNOLOGY & MANAGEMENT PGDMFM 2012-2014 (1st Year

Q.8

%he following table, lists the actual rates.forward contracts rates for/ different maturities. 1rom these rates, calculate the cross rates. Outright Quotations for USD/INR and USD/ZAR(*) !S#I"R !S#RA"# Bid Rate As& Rate Bid Rate As& Rate Spot '(.,($) '(.,(') (.)7*( (.)7), 1 wee& '(.,(), '(.,(() (.)71(.)7*$ wee&s '(.,(7) '(.,-*) (.)--( (.)711 1 month '(.,-', '(.,-7, (.)-1$ (.)-5, $ months '(.,7,, '(.,75) (.)(() (.)-*-

Q. 9

<ross rate calculations helps in identifying the intermar&et arbitrage opportunity. %he following table, indicates the list of e3change rates quoted by three different ban&s. id!as" rates offered #$ three #an"s Bid Ban& A .=B>4!S#/ 1.5, Ban& B .<an?4!S#/ ,.$ Ban& < .=B>4<an?/ -.1,

As& 1.51 ,.$,$ -.$,

<hec& whether any arbitrage opportunity e3ist or not@ If e3ists, show how the arbitrage profit can be made.

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