(1) USD HKD 7.

0000 Spot

USD HKD 7.1000 6 months

Interest Rates Hong Kong 4%

US of A 3%

Calculate Arbitrage, if any.

(Ans.: Borrow HKD Gain HKD 9,500)

(2) USD INR 52 Spot

USD INR 53 6 months

Interest Rates India 9%

US of A 5%

Calculate Arbitrage, if any.

(Ans.: Borrow $; USD 283)

(3) CAD CHF 0.8800 Spot

CAD CHF 0.8770 6 months

Interest Rates

(1) USD EUR 0.7000 Spot

Interest Rates Europe 6%

US of A 5%

Calculate 6 month Forward Rate.

(Ans.: USD EUR 0.7034)

(2) CHF CAD 0.8500 Spot

Interest rates Canada 3%

Swiss 4%

(i) Calculate 73 days forward Rate

(ii) Calculate Forward premium/discount annualized.

(iii) Write your observation.

(iv) Which currency is at Premium?

(Ans.: USD EUR 0.8483

(1) Calculate interest receivable in each of the currency for million

Currency Spot 6 month Forward Interest Rates

INR
51.00 51.20 51.60 51.80 6.00% 6.40%
USD INR
54.20 54.40 54.60 54.80 4.70% 5.00%
AUD INR
48.00 48.30 48.60 48.80 5.20% 5.50%
CAD INR
4.10% 4.30%

(Ans.: INR 30,000; USD 31,496; AUD 29,772; CAD 26,839; Select USD)

(2) Calculate interest payable in each of the currency for million.

Currency Spot 6 month Forward Interest Rates

INR
51.00 51.20 51.60 51.80 8.00%
USD INR
AUD INR 54.20 54.40 54.60 54.80 4.70%

CAD INR 48.00 48.30 48.60 48.80 5.20%

4.10%

(Ans.: INR USD AUD CAD Borrow CAD

41,000 41,078 38,875 38,525)

(3) Calculate interest payable in each of the currency for 2 million.

Currency Spot 3 month Forward Interest Rates

INR
52.50 53.00 53.10 53.30 9.00% 9.20%
USD INR
47.00 47.30 47.50 47.80 4.50% 4.70%
CHF INR
68.20 68.40 68.50 68.70 5.00% 5.20%
EUR INR
5.30% 5.50%

(Ans.: INR USD CHF EUR Borrow EUR

46,000 54,334 60,485 42,364)