Q2: a) Consider that Alpha Textile Mills ("ATM") sold PKR 10 million of yarn to Bravo Textile Mills ("BTM") on 120 days credit basis against an inland letter of credit ("LC") issued by Allied Bank. After 60 days, ATM receives several new orders and hence funds are required to process orders. ATM's Bank is amenable to discounting this inland LC and have quoted interest (markup) rate based off 1-month KIBOR, currently 13% plus a credit spread of 2%. Should ATM proceed with this offer, what proceeds will it collect after bill discounting? b) Consider that a 3-year PIB was auctioned on Jul 18, 2013 with a cut off yield (coupon rate) of 8.75%. This paper currently yields 12.0718%. Calculate the clean price and dirty price of the bond as of April 18, 2015. c) Consider a situation wherein FABL is borrowing PKR 500 million from HBL for 30 days against 1- Year T-Bill in a Repo transaction @ 7%. This instrument was issued on Nov 01, 2013 with maturity date of Oct 31, 2014. Repo transaction is executed on March 16, 2012 (value date), 2013, whereas mark-to-market yield of this instrument is 5.83%. Calculate the sale price and repurchase price of T-bill for FABL. What is the markup that was paid by FABL? Assume 365 days calendar convention was followed. d) Consider that a T-Bill with a face value of PKR 5,000 issued at a discount which currently yield 9.4689%. Calculate price of this instrument and the discount amount at which T-Bill was initially auctioned. e) Consider a situation wherein following financials are available: Spot Rate USD/PKR=160; 3- months KIBOR= 7.5%, whereas 3-months LIBOR=0.25%. Calculate USD/PKR forward rate for 90 Days. Assume 360 Days Basis approach is used. Q2: a) Consider that Alpha Textile Mills ("ATM") sold PKR 10 million of yarn to Bravo Textile Mills ("BTM") on 120 days credit basis against an inland letter of credit ("LC") issued by Allied Bank. After 60 days, ATM receives several new orders and hence funds are required to process orders. ATM's Bank is amenable to discounting this inland LC and have quoted interest (markup) rate based off 1-month KIBOR, currently 13% plus a credit spread of 2%. Should ATM proceed with this offer, what proceeds will it collect after bill discounting? b) Consider that a 3-year PIB was auctioned on Jul 18, 2013 with a cut off yield (coupon rate) of 8.75%. This paper currently yields 12.0718%. Calculate the clean price and dirty price of the bond as of April 18, 2015. c) Consider a situation wherein FABL is borrowing PKR 500 million from HBL for 30 days against 1- Year T-Bill in a Repo transaction @ 7%. This instrument was issued on Nov 01, 2013 with maturity date of Oct 31, 2014. Repo transaction is executed on March 16, 2012 (value date), 2013, whereas mark-to-market yield of this instrument is 5.83%. Calculate the sale price and repurchase price of T-bill for FABL. What is the markup that was paid by FABL? Assume 365 days calendar convention was followed. d) Consider that a T-Bill with a face value of PKR 5,000 issued at a discount which currently yield 9.4689%. Calculate price of this instrument and the discount amount at which T-Bill was initially auctioned. e) Consider a situation wherein following financials are available: Spot Rate USD/PKR=160; 3- months KIBOR= 7.5%, whereas 3-months LIBOR=0.25%. Calculate USD/PKR forward rate for 90 Days. Assume 360 Days Basis approach is used
