b solve the following

The risk free rate of interest rate in USA is 8% p.a. and in UK is 5% p.a. The spot exchange rate between US $ and UK is 1$ = 0.75. Assuming that is interest is compounded on daily basis then at which forward rate of 2 year there will be no opportunity for arbitrage. Further, show how an investor could make risk-less profit, if two year forward price is 1 $ = 0.85 . Given e0.-06 = 0.9413 & e-0.16 = 0.852, e0.16 = 1.1735, e-0.1 = 0.9051

Barclays is a British multinational bank and financial services company headquartered in London. It is a universal bank with operations in retail, wholesale and investment banking. Barclays provides financial services across the Globe. The Company raised an invoice amount is 6,77,500. Credit period is three months. Exchange rates in London are : Spot Rate (/) 145.4967 - 145.5007 3-month Forward Rate (/) 148.7859 - 148.7890 Rates of interest in Money Market : Deposit Loan 9% 11% 5% 8% Compute and show how a money market hedge can be put in place. Compare and contrast the outcome with a forward contract.

On 1st April, 180 days interest rate in the PHP and NPR are 9.18 per cent and 10 per cent per annum respectively. The NPR/PHP spot rate is 0.4844. What would be the forward rate for NPR for delivery on 30th September?

On April 1, 3 months interest rate in the and are 4% and 7% per annum respectively. The / spot rate is 0.00787. What would be the forward rate for for delivery on 30th June? Strategic Financial Management 11 SANJAY SARAF SIR IPR EQUATION PROBLEM - 8 On 1st April, 180 days interest rate in the PHP and NPR are 9.18 per cent and 10 per cent per annum respectively. The NPR/PHP spot rate is 0.4844. What would be the forward rate for NPR for delivery on 30th September?

Following are the rates quoted at National Stock Exchange (NSE) for Canadian Dollar: CAD/` 49.87/97 Interest Rates India Canada 3 m Forward 35/85 3 months 8% 5% 6 m Forward 65/90 6 months 10% 8% Verify whether there is any scope for covered interest arbitrage if you borrow rupees.

Bhawal Steel Agency, are engaged in the manufacturing, supplying, exporting and importing of a wide range of Stainless Steel products. etc from Brazil and Slovak Republic and exports such products to Singapore and Australia after processing. The company has receivables of SGD3,50,000 and payables of AUD$2,45,00 three months from now. The following rates exchanges rates are available in the market: Exchanges Rates ` / SGD ` /AUD$ Spot 46.9580 - 47.0080 49.6825 - 49.7025 Three month forward 47.0680 - 47.0880 49.7225 - 49.7425 The current rates (per annum) are as under Maturity Rupee (%) SGD(%) AUD$(%) 3 months 7.00/8.00 3.00/3.20 5.00/5.20 The company is considering to cover the cover the exposure either through the forward market money market. You are required to advise the company as to which alternative should be better for covering both the payable and receivable.

Techinfo Ltd. Has imported specialty computer equipments worth US$ 250,000 from a company in US. The amount due for the imports is payable after 3 months. Mr. Garg, the treasury manager of Techinfo has collected the following market quotes: Exchange rates: Sport Rs./$ 47.15/47.30 Forward 3 month 55/60 Interest rates(p.a.): Dollar (3 months) 6.00%/6.50% Rupee (3 months) 10.00%/11.00% The supplier of the equipments has offered a discount of $5000 if the payable is settled at the current date. Mr.Garg is reviewing the following alternatives to settle the payable: i. Cover through forward market. ii. Cover through money market. iii. Avail the cash discount of $5000 by taking a bridge loan at 9% p.a. from a lending institution.

Bharat Electronics Limited in Bangalore exports space vehicles to Belgium by importing all the components from south Korea. Imports are invoiced in Hong Kong dollars and exports in Euro. The company is exporting 6000 unit at a pries of Euro 165 per unit. The cost of imported components is HK$ 75. The fixed cost and other variable costs per unit per unit are `1200 and `2500 respectively. The cash flows in foreign currencies are due in six months. The current exchange rates are as follows : `/Euro : 59.60/62 `/HK$ : 5.96/5.98 After six months the exchanges rates (at the time of receipts and payments of foreign currency) turn out as follows : `/Euro : 60.30/32 `/HK$ : 6.23/25 You are required to : i. Calculate the loss/gain due to the transaction exposure. ii. Based on the following additional information, calculate the loss/gain due to transaction and operating exposure if the life contracted price of washing marching is `9500. The current exchange rates change to `/Euro : 59.85/87 `/HK$ : 6.00/02 Price elasticity of demand of the product in Germany is estimated as 2.5. Payment and receipts are to be settled/received at the end of six months. Solution : i. Firm faces the following transaction exposure receivable = 6000 165 = 990,000 payable = 6000 75 = HK $ 4,50,000 Strategic Financial Management 21 SANJAY SARAF SIR FOREIGN CURRENCY EXPOSURE PROBLEM - 15 Bharat Electronics Limited in Bangalore exports space vehicles to Belgium by importing all the components from south Korea. Imports are invoiced in Hong Kong dollars and exports in Euro. The company is exporting 6000 unit at a pries of Euro 165 per unit. The cost of imported components is HK$ 75. The fixed cost and other variable costs per unit per unit are `1200 and `2500 respectively. The cash flows in foreign currencies are due in six months. The current exchange rates are as follows : `/Euro : 59.60/62 `/HK$ : 5.96/5.98 After six months the exchanges rates (at the time of receipts and payments of foreign currency) turn out as follows : `/Euro : 60.30/32 `/HK$ : 6.23/25 You are required to : i. Calculate the loss/gain due to the transaction exposure. ii. Based on the following additional information, calculate the loss/gain due to transaction and operating exposure if the life contracted price of washing marching is `9500. The current exchange rates change to `/Euro : 59.85/87 `/HK$ : 6.00/02 Price elasticity of demand of the product in Germany is estimated as 2.5. Payment and receipts are to be settled/received at the end of six months.