Case 1: You are travelling Europe with Rs.25,000 to spend.

You see a Nexus mobile phone priced at

300. The money changer is offering an exchange rate of 85 for EUR vs INR. Can you buy the mobile
phone?

Case 2: You are travel US with 1000 to spend. You see a canon camera priced at $1500. The
prevalent exchange rate as per Bloomberg is 1.65 for USD vs GBP. Can you buy the mobile phone?

Case 3: You travel to Singapore for a business trip and was allotted 30,000 INR for stay at a hotel for
5 days. The price range available with different comfort level are 100, 110, 120, 130 and 140. An
authorised dealer in India offers you an exchange rate of INR vs SGD of 50. What is the maximum
price range you can afford to stay?

Case 4: You plan a vocation trip from Austria to Vancouver, Canada with a budget estimate of 1000
EUR. A travel agent offers you a package of 1500 CAD with 5 nights stay plus travel. He also offers to
change EUR to CAD for an exchange rate of 1.50. Can you afford this vacation trip?

Case 5: An exporter of garments in India is expecting a receipt of $10,000 after three months from a
customer. The spot exchange rate for USD/INR is 60. However he is worried about the exchange rate
prevailing after three months may go down, which may eat up his profit. The three month forward
exchange rate for USD/INR is 62. Which type of forward FX deal should he enter into? What would be
his net receipt or payment in INR after three months?

Case 6: An importer of edible oil in India is expected to pay 100,000 to a vendor from Germany
after two months. The spot exchange rate for EUR/INR is 85. However he is worried about the
exchange rate prevailing after two months, which may eat up his profit. The two months forward
exchange rate for EUR/INR is 87. Which type of forward FX deal should he enter into? What would be
his net receipt or payment in INR after two months?

Case 7: A US portfolio manager has a UK bond of 100,000 in his portfolio, which is maturing after
three months.The spot exchange rate for GBP/USD is 1.65. As he is worried about the exchange
prevailing after three months, which may eat up his profit. The three months forward exchange rate
for GBP/USD is 1.67. Which type of forward FX deal should he enter into? What would be his net
receipt or payment in USD after two months?

Case 8: A FX trader in US predicts appreciation of USD against INR. The spot exchange rate is 60.
The three months forward exchange rate is 62. He predicts the exchange rate to be 65 after three
months. Which type of forward FX deal should the speculator enter? What would be his net
receipt/payment if the exchange rate moved as he predicted?

Case 9: A portfolio manager from US, wanted to take some exposure in IT sector in India. He
decided to invest $10,000 for three months and wanted to repatriate the net proceeds at the end of
three months. However, he wanted to be sure that his investment fetches a return which is not
affected by the risk of exchange rate fluctuation. The following are the series of transaction the
investment manager would enter into:

Step 1: Investment manager needs to buy INR equivalent to $10,000

Step 2: Invest the INR in Indian IT firm
Step 3: At the end of three months, he sells the investments in INR

Step 4: He converts INR to USD, which is called as repatriation.

Which kind of FX transaction would the investment manager would enter in order to hedge the risk
and why? (hint: either of FX Buy, FX Sell, Cross Deal, FX swap or NDF)