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FORWARD RATES, PREMIA:

Q.1) A bank quoted following rates for US \$: Spot 47.70/02

Forward Premia 1 month 3/0, 2 month 10/3, 3 month 18/9, 6 month 66/55.

Calculate the forward rates.

(Ans.: Spot 47.70 and 47.72, 1 month 47.67/47.72, 2 month 47.60/47.69, 3 month 47.52/47.63, 6 month 47.04/47.17)

Q.2) Following are the USD INR quotes by a banker at Mumbai:

Spot: 47.6420/80

3 month forward: 60/100

Calculate annualized forward premium/discount. [Calculate AFM]

(Ans.: 0.0504% for Bid, 0.0839% for Ask, 0.0672% for mid)

Q.3) Following are the GBP JPY quotes by a banker at Tokyo:

Spot: 191.24/34

60 days forward: 5/8

Calculate annualized forward premium/discount. [Calculate AFM]

(Ans.: All premium 0.1569% for Bid, 0.25% for Ask, 0.2039% for Mid)

Q.4) From the following USD INR Dollar quotations, calculate the likely quotations for

(a)    1 month 20 days forward and

(b)   4 months 10 days forward

Spot                 47.7570/980

1 month           110/210

3 months         250/400

6 months         700/890

(Ans.: 47.7727 – 47.8253 and 47.802 – 47.8598)

Q.5) 1 USD = CAD 1.0187/07 is Spot Rate. 1 month forward is 30/50 and 2 months forward is 54/68. Calculate swap points and outright forward rate for 50 days.

(Ans.: Swap Points 46/62 and Outright Rate 1.0233/1.0269)

Q.6) The current Spot rate of British Pound against the US dollar is £ 1.5763 per US\$. The 90-day forward rate is £ 1.5436. Calculate annual forward discount or premium for US\$.

(Ans.: 8.30% Discount)

Q.7) Assume the spot rate of the British Pound is \$1.73. The expected spot rate one year from now is assumed to be \$1.66. What percentage depreciation per annum does it reflect?

(Ans.: 4.05% Depreciation)

Q.8) 1 GBP = USD 1.6220/1.6250 Spot

1 month forward 80/60

2 month forward 120/90

Calculate Swap Points and Outright forward rate for:

(a)    21 days (b) 1 month and 10 days.

(Ans.: For 21 days swap points 56/42 and Outright Rate 1.6164/1.6208. For 1 month and 10 days Swap Points 93/70 and Outright Rate 1.6127/1.6180)

Q.9) Following Quotes are given in Mumbai:

USD 1 = INR Spot 47.7000/7200

3 months forward 270/360

(a)    Write the quotation in outright form

(b)   Calculate annualized forward premium/discount for bid/offer rates

(c)    What is the likely forward quote for 2 months and 20 days?                     (Nov. 2011)

(Ans.: (a) USD INR 47.7270/47.7560 (b) Annualized Forward premium for bid 0.23% and 0.30% (c) 47.7240/47.7520)

Q.10) Spot USD INR 50.00

Spot EUR INR 60.00

In 1 year Dollar will appreciate by 4% and Euro will depreciate by 5%.

Calculate 1 year later likely rates of USD INR, EUR INR, EUR USD and USD EUR.

(Ans.: 52, 57, 1.0962 and 0.9123)

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