Top 13 Forex and Interest Rate Questions You Need To Solve




Q.1) The current exchange rate between US dollar and Euro is $1.1/Euro. [As the amount expressed is in US $ (per €) here US $ is home currency and € is foreign currency]. Interest rate in the US and Euro region is 5% and 6% respectively. What is exchange rate expected after 6 months?

(Ans.: 1.09466. Hence, Euro depreciates. Dollar is at premium)


Q.2) Exchange Rates:

35.0020/$ (Spot)

35.9010/$ (6 months)

Interest Rates:

$ 7% per annum

12% per annum

Workout arbitrage possibilities.                                           (Mumbai University, October, 2002)

(Ans.: Rs. 1583 on investment of Rs. 1 million)


Q.3) Currency Units:

E.g. Currency $: 0.6650/DM (Spot)

Currency $: 0.6700/ DM (3-months)

Interest Rates:

DM: 7.00% per annum

Currency $: 9.00% per annum

Calculate arbitrage gain possible from the above data.          (Mumbai University, April, 2002)

(Ans.: Formula 1 – Positive Borrow Home. Invest foreign Gain 2,650 CAD an investment of 1 million CAD. Formula 2 – Negative Reject)


Q.4) Spot rate is /$ 39. Interest Rate in India is 8% per annum. Interest rate in US is 5% per annum. Calculate possible 6-months forward rate as per international Fischer Effect.

(Ans.: F = 39.5707 /$)


Q.5) The following table shows interest rates for $ and FFr. The spot exchange rate 7.05 FFr per dollar (All the percentage rates are annualized).

                  3 months

Dollar interest rate                  11.5%

France interest rate                  19.5%

Find 3 months forward rate.                                                 (Mumbai University, October 2003)   

(Ans.: Forward rate as per interest rate parity theory would be FFr 7.1871/$)


Q.6) Exchange Rates:

CHF 1.3829 per $ (Spot)

CHF 1.3849 per $ (3 months)

Interest Rates:

$ 4 per cent per annum

CHF 5 per cent per annum

Workout the arbitrage possibilities.

(Ans.: Formula I – Negative. Formula II- Positive, 1038 foreign currency/$1,038 Gain on million)


Q.7) Exchange Rates:

Can $: 0.665/DM (Spot)

Can $: 0.670/DM (3 months)

Interest Rates:

DM: 7.00% per annum

Can $: 9.00% per annum

Calculate the arbitrage gain possible from the above data.    (Mumbai University, April 2002)

(Ans.: Formula I – Positive, Can$ 2,650 on million. Formula II- Negative)


Q.8) From the following data calculate the possibilities of a gain/loss in arbitrage.

Spots rate FFR 6.00                                        = US $ 1

6 months forward rate FFR 6.0020                = $ 1

Annualized interest rate on 6 months US $    = 5%

Annualized interest rate 6 months Fr              = 8%.               (Mumbai University, May 2004)

(Ans.: Formula I – Negative. Formula II- Positive, 14,653)





Q.9) SGD 2.0749/EUR spot in Euroland interest rate 2.24% p.a. for 6 months.

SGD 2.0622/EUR 6 month Forward.

Compute annual interest rate in Singapore for 6 months to ensure no arbitrage possibilities.

(Ans.: 1%)


Q.10) The spot rate in Canada for British Pound is CAD 2.2646/GBP. Forward rate for 3 months is CAD 2.2520/GBP. Interest rates in Canada are 2.64% per annum for 3 months. Find interest rates in Britain to avoid any arbitrage possibilities.

(Ans.: 4.89%)


Q.11) If spot rate in Japan for US$ is ¥ 111.04/$. Japan interest rates are 0.052% p.a. and US interest rates are 2.11% p.a. Find 9 month forward rate as per CIP.

(Ans.: ¥ 109.35/$)


Q.12) Spot rate for US Dollar is Rupee 50. Interest Rate in India is 11% per annum and in US of A it is 6% per annum. Calculate 3 month and 6 month forward rates.

(Ans.: 50.6158 and 51.2136)


Q.13) 1 GBP = USD 1.6400 Spot and 6 months forward rate is 1 GBP = USD 1.6480. Find interest rate in Britain if interest in US of A is 5%; as per international fischer effect.

(Ans.: 4%)

The following two tabs change content below.
We, at, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to [email protected]

Like it? Share with your friends!

BMS Team

We, at, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to [email protected]


Choose A Format
Personality quiz
Series of questions that intends to reveal something about the personality
Trivia quiz
Series of questions with right and wrong answers that intends to check knowledge
Voting to make decisions or determine opinions
Formatted Text with Embeds and Visuals
The Classic Internet Listicles
The Classic Internet Countdowns
Open List
Submit your own item and vote up for the best submission
Ranked List
Upvote or downvote to decide the best list item
Upload your own images to make custom memes
Youtube and Vimeo Embeds
Soundcloud or Mixcloud Embeds
Photo or GIF
GIF format