NMIMS Solution Sep 2020
- 1st Semester NMIMS Sep 2020 – Rs. 3000/- Only
- 2nd Semester NMIMS Sep 2020 – Rs. 3000/- Only
- 3rd Semester NMIMS Sep 2020 – Rs. 3000/- Only
- 4th Semester NMIMS Sep 2020 – Rs. 2500/- Only
Q1. You are given the following interest rates.
The 3-month forward rate is Rs. 75/$. Calculate the 3-month forward rate 6-months from now.
Q2. Suppose that the exchange rate for U.S. $1 for another currency is such that U.S. $1 = 3.5 ARS (Argentine pesos). Further suppose that if the exchange rate remains the same, you will receive a 25% return on your investment in ARS currency over the next year’s period. As an investor, you are aware of the volatility in Argentina’s currency exchange so sudden movements are expected.
If the exchange rate were to change such that $1 = 50 ARS, what return do you expect on the investment? If the exchange rate were to change such that $1 = 2 ARS, what return do you expect on the investment?
Q3. Groucho Marx, as Governor of Freedonia’s central bank, has problems. He sees the value of his currency, the FDK, under constant attack from Rosor, a wealthy mutual-fund manager.
Apparently, Rosor believes that the FDK will soon devalue from GBP 1.000 to 0.950.
- Currently, both GBP and FDK interest rates are 6% p.a. By how much should Groucho change the one-year interest rate so as to stabilize the spot rate even if Rosor expects a spot rate of 0.950 in one year? Ignore the risk premium—that is, take 0.950 to be the certainty equivalent.
- If the interest-rate hike also affects Rosor’s expectations about the future spot rate, in which direction would this be? Taking into account also this second-round effect, would Groucho have to increase the rate by more than your first calculation, or by less?
Previous Sem of June NMIMS Assignments
Q1. CQS Plc is a UK company that sells goods solely within UK. CQS plc has recently tried a foreign supplier in Netherland for the first time and need to pay €250,000 to the supplier in six months’ time. You as financial manager are concerned that the cost of these supplies may rise in Pound Sterling terms and has decided to hedge the currency risk of this account payable. The following information has been provided by the company’s bank:
Spot rate (€ per £): 1·998 ± 0·002
Six months’ forward rate (€ per £): 1·979 ± 0·004
Money market rates available to CQS plc:
|One-year Pound Sterling interest rates:||6·1%||5·4%|
|One-year Euro interest rates:||4·0%||3·5%|
Assuming CQS plc has no surplus cash at the present time you are required to evaluate whether a money market hedge, a forward market hedge or a lead payment should be used to hedge the foreign account payable.
Q2. On 30th June 2009 when a forward contract matured for execution you are asked by an importer customer to extend the validity of the forward sale contract for US$ 10,000 for a further period of three months.
Contracted Rate US$1 = Rs.41.87
The US Dollar quoted on 30.6.2009
Spot Rs. 40.4800/Rs. 40.4900
Premium July 0.1100/0.1300
Premium August 0.2300/0.2500
Premium September 0.3500/0.3750
Calculate the cost for your customer in respect of the extension of the forward contract.
Rupee values to be rounded off to the nearest Rupee.
Margin 0.080% for Buying Rate
Margin 0.25% for Selling Rate
Q3. Wenden Co is a Dutch-based company which has the following expected transactions.
One month: Expected receipt of £2,40,000
One month: Expected payment of £1,40,000
Three months: Expected receipts of £3,00,000
The finance manager has collected the following information:
Spot rate (£ per €): 1.7820 ± 0.0002
One month forward rate (£ per €): 1.7829 ± 0.0003
Three months forward rate (£ per €): 1.7846 ± 0.0004
Money market rates for Wenden Co:
|One year Euro interest rate:||4.9%||4.6%|
|One year Sterling interest rate:||5.4%||5.1%|
Assume that it is now 1 April.
- Calculate the expected Euro receipts in one month and in three months using the forward market. (5 Marks)
- Calculate the expected Euro receipts in three months using a money-market hedge and recommend whether a forward market hedge or a money market hedge should be used.
Previous Year NMIMS Solution
International Finance-NMIMS Solution-June 19
Q1. Exchange rates can be explained by different underlying theories. Explain briefly any three of these theories, along with mathematical formulas, where applicable. (10 Marks)
Q2. There are short term and long term fluctuations in Exchange rates, and various factors are responsible for this. Explain the eight factors and whether they contribute to long or short term fluctuations. (10 Marks)
Q3. An exporter has Eur 10 million receivable in 3 months, and is in a dilemma whether to book forward contract to sell Euro or to sell Eur-INR 3 month futures.
- Explain to him in a tabular form the characteristics and differences between Forward and Futures. (5 Marks)
- Then with an example (assume 3 months forward and futures rate of Eur/INR 79) explain the cash flows in either situation. (5 Marks)
Amity Solved Assignments
You can buy Amity Solved Assignments from others sections. Let us know if any your amity subject is not mentioned or unable to find your subject.