1 a - You are an importer of Crude Oil in India. You have recently finalised a contract

and have to pay $1,000,000 after 3 months. You want to hedge your foreign

currency exposure. The 3 month forward rate is Rs.76/$. Call and put options of

Strike Rs.76/$ are available at premium of Rs.1/$. Explain how will you do it using

a) Futures contract b) Options contract. Please explain in detail which contracts you

would use and would you buy/sell the contract and determine your payoff in future if

exchange rate after 3 months turns out to be a) Rs.73/$ and b) Rs.78/$

1b A long futures contract expiring after one year on the stock of ABC Limited was

entered into today at the futures price of Rs.100 which was also the closing price of

the day. There was a margin requirement of 25%. There was a margin call after 3

months and 8 months when amounts of Rs.20 and Rs. 15 were deposited

respectively. You did not withdraw any amount from the margin account. The

closing price on after one year was Rs.106. What is your profit considering that you

borrowed the margin amount at 12% p.a. compounded continuously. Lot size is 50

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