- Concepts (3×5=15)
- Official settlement concept
- Types of contracts
- Read the case and answer the questions below
The crisis started in Thailand with the financial collapse of the Thai baht after the Thai government was forced to float the baht (due to lack of foreign currency to support its fixed exchange rate), cutting its peg to the U.S. dollar, after exhaustive efforts to support it in the face of a severe financial overextension that was in part real estate driven. At the time, Thailand had acquired a burden of foreign debt that made the country effectively bankrupt even before the collapse of its currency. As the crisis spread, most of Southeast Asia and Japan saw slumping currencies, devalued stock markets and other asset prices, and a precipitous rise in private debt.
- Explain the concept of Hot money with context to the above case (3 marks)
- Why is FDI important to an organization(5 marks)
- Explain convertibility of a currency with reference to the above case(2 marks)
Solve the following sum
USD/INR Spot 50.1245
3 month USD/INR Forward 50.1267
USD Int rate:- 3%pa INR Int rate:- 4% pa
Section 2 (solve any 3= 10 marks each)
3a. Factors leading to growth of euro currency market
3b. What are the features of bretton woods system
4a. How can a country correct the balance of payment position
4b. Explain SDR.
5a. Find the best alternative to invest 1 Million INR for a period of 3 months
5b. For the following quote, calculate Spread, Spread percentage, mid rate and inverse rate
AUD SGD 1.5567/04
6a. Compute the arbitrage if any EUR/USD = 0.8631, EUR/GBP = 1.4600 and USD/GBP = 1.6939.
6b. Spot USD AED 3.7584
USD Int rate:- 3% pa
AED Int rate:- 4%pa.
Find the 3 month forward rate and hence find AFM as well.
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