Q1: Short Answer Questions (SAQs): a) An importer in Pakistan has negotiated a 180 days documentary acceptance letter of credit from a supplier of die casting parts in the US for USD 1 million. Spot USD/PKR=160 whereas 180 days forward USD/PKR= 164. Assume that the importer purchases an outright forward from the bank. At maturity date, what cash will be exchanged between the importers and suppliers banks? b) Consider that Alpha Enterprises books 3-months import forward closeout for USD 1 million @ USD/PKR=160. At maturity date, due to short shipment, USD 0.20 million remain unutilized. Assume that at maturity date, the USD/PKR=159.50. How will Aplha make settlement for this forward close out? c) Consider that Sapphire Textile Mills (STM) has received a USD 2.5 million export bill for receipt after 90 days and wants to discount it today. Spot rate USD/PKR= 98.40, whereas a 3-months KIBOR Offer =7% and 3-months LIBOR=0.25%. Calculate the discounted USD rate and amount? d) Suppose a client enters into a SELL/BUY US Dollar Swap and raise Pak Rupees against US Dollars. Interest rate in USD is LIBOR @ 0.25% whereas interest rate in PKR is 8.00%. The client has the opportunity to invest in risk-free T-Bills @ 9.75%. What arbitrage gain/(loss) will the client end up in this SELL/BUY USD Swap?