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Institute For Technology & Management PGDMFM 2012-2014 (1st Year)

The document contains questions for an exam on foreign exchange markets. Part A contains multiple choice questions about how monetary policy impacts exchange rates and calculations of exchange rates. Part B asks students to explain concepts like forward contracts, derivative products offered by banks, and perform calculations using exchange rate data tables, including interpolating forward rates and identifying arbitrage opportunities through cross rate calculations.

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62 views3 pages

Institute For Technology & Management PGDMFM 2012-2014 (1st Year)

The document contains questions for an exam on foreign exchange markets. Part A contains multiple choice questions about how monetary policy impacts exchange rates and calculations of exchange rates. Part B asks students to explain concepts like forward contracts, derivative products offered by banks, and perform calculations using exchange rate data tables, including interpolating forward rates and identifying arbitrage opportunities through cross rate calculations.

Uploaded by

parthasarathi_in
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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INSTITUTE FOR TECHNOLOGY & MANAGEMENT PGDMFM 2012-2014 (1st Year

TERM-I (Sept.) EXAMINATION Subject: Forex Markets Date: !-"#- "$ T%&e: (Max 2hrs)

Marks :'"

I(struct%o(s :
$. . 4. 7. )art-A %s co&pu*sor+. Atte&pt a(+ t,ree -uest%o(s .ro& )art-/ 0 a(+ t1o .ro& )art-2 T,e a(s1ers s,ou*3 be spec%.%c to t,e -uest%o( Appropr%ate exa&p*es s,ou*3 be 5%6e( 1,ere6er (ecessar+. )*ease 1r%te 3o1( t,e -uest%o( (u&ber o( t,e a(s1er s,eet be.ore atte&pt%(5 %t.

)ART-A ( $ Mark .or eac, -uest%o() 1. Suppose RBI pursue a tight monetary policy. All else being equal, the impact of this policy was to __________ interest rates in the India relati e to those in !SA and cause the dollar to __________ against I"R. a. #ecrease, depreciate b. #ecrease, appreciate c. Increase, depreciate d. Increase, appreciate $. %he spot !S#I"R bid and as& rate is gi en as '(.)1$*+'(.)1*,. If the * month+ bid+as& in points are )*+'$, then what would be I"R!S# * month rate in outright quotations. a. '(.),(+'(.),-b. ,.,$1,'+,.,$1,) c. ,.,$1,)+,.,$1,' d. "one of these. *. A depreciation of the I"R refers to a .an/0 a/ 1all in the I"R price of foreign currency b/ Increase in the I"R price of foreign currency c/ 2oss of foreign+e3change reser es for the India. d/ "one of these Suppose spot !S#4I"R is '5.() ad 1 year !S interest rate is )6 while it is 116 in India. %he 1 year !S#4I"R forward rate is a. '$.$$ b. '$.$7 c. '7.'$ d. "one of these.
1

'.

Strictly Confidential

INSTITUTE FOR TECHNOLOGY & MANAGEMENT PGDMFM 2012-2014 (1st Year )ART-/ 8.7. (A(s1er a(+ T,ree 8uest%o(s ) De.%(e Fore%5( Exc,a(5e a(3 Exp*a%( t,e .o**o1%(5 9 a. Nostro 0 :ostro Accou(ts b. D%..ere(t .ore%5( exc,a(5e sett*e&e(t &o3es c. Exp*a%( .ore%5( exc,a(5e &arket; &arket part%c%pa(ts 0 Fore%5( exc,a(5e Market Tra(sact%o( T+pes ( $" ) <,at 3o +ou u(3ersta(3 b+ For1ar3 2o6er= Exp*a%( 1%t, a3e-uate exa&p*es. ( $" ) <r%te s,ort (otes o( t,e .o**o1%(5 9 ( $" ) a. /%3 Rate 0 O..er Rate b. D%rect Rate 0 I(3%rect Rate c. 2us,%o( 0 Sprea3 3. O6erbou5,t 0 O6erso*3 )os%t%o(s <,at %s Der%6at%6e= <,o are t,e users o. Der%6at%6es= ( $" )

8.' 8.>

8.? 8.!

<,at are t,e Der%6at%6e pro3ucts o..ere3 b+ ba(ks to 2orporates= <,at are t,e 5u%3e*%(es 0 re5u*at%o(s o. R/I %( t,%s co((ect%o(= ( $" ) )ART-2 (A(s1er a(+ T1o 9 Eac, -uest%o( carr+ ! &arks) th 8n 9uly 1' the following rates are quoted by a ban& as gi en in table below. :owe er a corporate customer wants to buy 1,,,,,, !S# on 8ctober $1st. %he ban& has to quote a forward rate for this date. Arri e at the rate by interpolation method.

Q.7

Cash/Swap rates in points !S#I"R Spot 1 ;onth $ ;onth * month ' months ;aturity #ate 9uly 1'th August 1'th September 1'th 8ctober 1'th "o ember 1'th Bid Rate '(.,($) 1*) 1', 15, 1() As& Rate '(.,(') 1*, 1** 1') 1))

Strictly Confidential

INSTITUTE FOR TECHNOLOGY & MANAGEMENT PGDMFM 2012-2014 (1st Year

Q.8

%he following table, lists the actual rates.forward contracts rates for/ different maturities. 1rom these rates, calculate the cross rates. Outright Quotations for USD/INR and USD/ZAR(*) !S#I"R !S#RA"# Bid Rate As& Rate Bid Rate As& Rate Spot '(.,($) '(.,(') (.)7*( (.)7), 1 wee& '(.,(), '(.,(() (.)71(.)7*$ wee&s '(.,(7) '(.,-*) (.)--( (.)711 1 month '(.,-', '(.,-7, (.)-1$ (.)-5, $ months '(.,7,, '(.,75) (.)(() (.)-*-

Q. 9

<ross rate calculations helps in identifying the intermar&et arbitrage opportunity. %he following table, indicates the list of e3change rates quoted by three different ban&s. id!as" rates offered #$ three #an"s Bid Ban& A .=B>4!S#/ 1.5, Ban& B .<an?4!S#/ ,.$ Ban& < .=B>4<an?/ -.1,

As& 1.51 ,.$,$ -.$,

<hec& whether any arbitrage opportunity e3ist or not@ If e3ists, show how the arbitrage profit can be made.

Strictly Confidential

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