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FOREIGN EXCHANGE - ARITHMETICS

RUPEES PER UNIT OF FOREIGN
CURRENCY BID ASK
USD 39.8500 39.8700
EURO 63.0700 63.1000
GBP 79.7000 79.7200
JPY 38.4000 38.4300
CHF 39.1700 39.2000
SGD 29.4500 29.4700
YUAN 5.6900 5.7000
KOREAN WON 4.0200 4.0300
AFRICAN RAND 5.1300 5.1500
AUSTRALIAN DOLLAR 37.3800 37.4000
SWEDISH KRONER' 6.7100 6.7500
DANISH KRONER 8.4500 8.4800
CANADIAN DOLLAR 36.6900 36.7300
THAI BHATT 126.4700 126.4900

Q.1. How much money would be realized by the Indian Exporters for?

US$ 1000, Yuan 20,000, SG$ 25000, JPY 10, 00,000.

Q.2 How much money would be payable for:

EURO10, 000, GBP 20,000, AUS$ 20,000

Q.3 You are travelling abroad on a world tour and you need the following currencies:

CANADIAN$ 10,000, KOREAN WON 25,000, SWEDISH KRONER 15,000.

Q.4 In India, the Foreign Currency Rates quoted are Direct. If the same rates are to be
quoted in a Foreign Country, what Bid and Ask rates would be offered for the
following Currencies: Korean Won, Swiss Franc, British Po und, and African Rand.

Similarly the other rates can be worked out.........................

Q.5 Using Indian Rupee as Vehicle Currency, work out the Bid and the Ask rates for:

a)EURO/US$ b) CHF/SGD c)GBP/Swedish Korner.

Q.6 In a Foreign Exchange Market, one of the dealers in Foreign Exchange has quoted
following spot and 6 months Forward Rate in respect of four currencies:

RS. PER UNIT OF FOREIGN CURRENCY

CURRENCY SPOT 6 MONTH FORWARD
BID ASK BID ASK
USD 40.1200 40.1600 39.3200 39.3800
EURO 63.0600 63.1000 65.0800 65.1400
CHF 37.8600 37.9000 37.5400 37.6000
GBP 79.7000 79.7400 80.2000 80.2600

a) c Find the annualized premium/discount for each currency with respect to

rupee?
b) c Based on answer in a) what forward rate do you expect for 12 Months
forward for each currency?
Q.7 Following Rates in the Foreign Exchange Markets of different countries are being
quoted at the same point of time: (Assuming all the countries follow the
convention of quoting direct rates)

A)c New York Market (USD) BID ASK

EURO 1.5912 1.5935

POUND 1.9817 1.9842

B) c LONDON (GBP) BID ASK

USD 0.5016 0.5025

EURO 0.8025 0.8050

C) c PARIS (EURO) BID ASK

USD 0.6284 0.6300

GBP 1.2454 1.2475

Do you think that there exists an arbitrage in the Foreign Exchange market?

If the scope for arbitrage exists how can it be exploited?

Q.8 A Bank is quoting :-

•SD/GBP spot 0.6835/0.6850 Ȃ Spot

1 Month Forward - 20/15

3 Months Forward - 30/40

•SD/E•RO spot 0.9280/0. 9290 Ȃ Spot

1 Month Forward - 30/25

3 Months Forward - 40/60

Find out a quote for GBP/Euro for 65 Days.

Q.9 Three different traders are quoting as follows:

TRADER -A : 1GBP = 1.9860 USD/1.9870 USD

TRADER-B : 1GBP = 2.8370 SGD/2.8370 SGD

TRADER-C : 1 USD= 1.4315 SGD/ 1.4325 SGD

Identify and Calculate the Triangular Arbitrage on 1 Million $.

Ans. Arbitrage gain is 2100$ on 1 Million.