International Finance Sums Summary for April 2014 Exams


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I.f sums summary!!
Chap1: FEA 1
TOPIC 1:
INVERSE/RECIPROCAL
B=1/A
A=1/B
INTERCHANGE D BASE N VARIABLE OF D GIVEN QUOTE AND FIND A 2nd NEW QUOTE!

TOPIC 2:
DIRECT N INDIRECT RATES
BASE:INDIRECT
VARIABLE:DIRECT
Calculate direct form or indirect form(use inverse method)

TOPIC 3:CROSS RATE
(1st currency/common currency)* (common currency/2nd currency)
How to identify?
2 quotations
3 currency
1 currency common
Eliminate d common currency
With d remaining 2 currency find a 3rd new quotation!!
Topic 4:
Percentage spread:
1.spread=ask-bid

2.%spread=spread/mean×100

3.%spread= ask-bid/ask+bid×200

4.point=1/10000 of the number

5.mean/mid/flat/avg rate=ask+bid/2

6.bid rate=mean – spread/2

7.ask rate= mean + spread/2
(Imp ques 11/12/13/14)

Topic 5:TWO POINT ARBITRAGE/GEOGRAPHICAL
(IMP TOPIC)
How to identify?
2 quotations will b given n u wl b askd to calculate arbitrage gain or arbitrage oppotunites!

TOPIC 6:(IMP TOPIC)
THREE POINT ARBITRAGE/TRIANGULAR
How to identify?
3 quotations will b given n u will b askd to calculate arbitrage gain or arbitrage opportunites
(Sums divided into 2 types)
Sums 1 to 4 one way quotations
Sums 5 to 13 two way quotations

Chapter 2:
FEA 2:
TOPIC 7:
FORWARD RATES (FORMULA METHOD)
F=S×(1+rv÷100×n÷12)
          _____________
          (1+rb÷100×n÷12)
With dis formula u can find
F,S,rv n rb!
How to identify?
If one numerical value of any 3 things r given n 1 value is missing dah means its formula method!

TOPIC 8:
CALCULATION OF SWAP POINTS
Fb=Sbid ×(1+ Rv d.r÷100 × n÷12)
                _________________
                (1+R.b l.r÷100 × n÷12)
            ____________________
Fa=Sask×(1+Rv l.r÷100 ×n÷12)
                  ——————-
                  (1+Rb d.r÷100×n÷12)
How to identify:
D topic is n extension of formula method
Here 2 numerical value of f,s,rv n rb will b given
Any one askd to find its swap points method

TOPIC 9:
FORWARD RATES(TABLE METHOD)
VARIETY 1:
SUM#1&2
(OUTRIGHT FORM):
(CONVERTING SWAP POINTS INTO FWD FORM)

VARIETY 2
SUM#3&4
(CAL OF SPECIFIC NO OF DAYS)

VARIETY 3
SUM#5&7
(CAL OF SPECIFIC DATE)

As of now only 3 varieties in syllabus

TOPIC 10:
AFM
(IMP TOPIC)
STRESS ON SUM 11/12/13
AFM= F-S÷S ×12÷n ×100

AFM= Rv -Rb

Topic 11:COVERED INTEREST ARBITRAGE:
(COMPULSARY TOPIC SECTION 1 Q 2A)
Step 1:
Identification
Step2:
Borrowings
Step3:
Investment
Step 4:
Arbitrage Gain
Note:
***Wenever we borrow base currency
In convert step (P×S)
In reconvert step (÷F)

***wenever we invest in variable currency
In convert step (P÷S)
In reconvert step ×F
Special note:dont stress more on case 2 sums i.e 5/6/7/8
Not askd in m.u paper so far!!

TOPIC 12:
BORROWING N INVESTMENT DECISION

FORMULA:
BORROWING
P÷Sbid ×(1+Rl.r÷100×n÷12)×Fask-P

IN A BORROWING SUM ALWAYS CONSIDER LOWEST VALUE 
AS ANS

INVESTMENT
P÷Sask×(1+R d.r÷100×n÷12)×Fbid-P

IN INVESTMENT SUM ALWAYS CONSIDER D HIGEST VALUE AS ANS
With 6 topic ur chap 2 of sums ends
Best of luck 🙂

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