1.Banks in Malaysia display its official exchange rates on a daily basis in banking halls as well as in daily newspapers. The rates of various currencies are displayed inTHREE (3) columns- one column for selling rates and two columns for buying rates.

a). Explain what do you understand bySelling TT/OD /Jualan TT/OD,Buying TT /Belian TTandBuying OD /Belian OD?(6 marks)

b).Explain therationalefor the two buying rates and only one selling rate in the bank's official foreign exchange rates. (5 marks)

2. A customer of your bank presents a bank draft issued by Standard Chartered Bank, Hong Kong for HKD17,500 being export proceeds that he receives from a Hong Kong buyer. The customer would like to receive immediate cash in MYR in exchange for the HKD draft and requests your bank to purchase the bank draft. Your bank's foreign exchange rates for today are quoted as follows:

Malaysian Ringgit

per foreign currency

Selling

TT/OD

Buying

TT

Buying

OD

1 US Dollar

3.7750

3.7150

3.7050

100 Hongkong Dollar

49.3900

46.9800

46.7800

100 Japanese Yen

3.3870

3.3200

3.3100

a).At what rate would your bank purchase the draft and how much MYR would your customer receive? (3 marks)

b).How much would your customer receive in MYR if the transaction was made by an inward telegraphic transfer instead of a bank draft?(3 marks)

c). Suppose your customer now wants to use the proceeds from theHKD draftto buy JPY for payment to a supplier in Tokyo. How much JPY currency can he gets?(3 marks)

3.To assist importers and exporters hedge their foreign exchange risks, banks in Malaysia provide three types of Forward Foreign Exchange Contracts (FEC). Name and Explain the FECs. (10 marks)