Suppose you have INR 10millions that you can invest in for one year anywhere in the world without any restriction. You are considering to either investing in the US or in India. The interest rate on one-year bonds in India is 8% and on one-year bonds in the US is 9%. The current exchange rate is INR 74.525/USD. What should be the one-year forward rate so that you earn the same return whether you invest in India or in the US.

a.

All the options are wrong

b.

74.525

c.

73.84128

d.

75.21505

e.

70.12125

An Omani firm has to make payment of 2 million INR to Indian Company after 30 days. Since the company exposing the risk of currency fluctuation so purchased the forward contract at OMR0.006279 = 1 INR. the spot rate after 30 days was OMR 0.006542/INR

Which of the following will be the profit or loss to the firm, if they execute the forward contract?

a.

Profit of OMR789

b.

All the options are wrong

c.

Loss of OMR 789

d.

Profit of OMR 526

e.

Loss of OMR 526