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MIX OF AFM AND INTEREST RATE:

Q.1) GBP rate in terms of Indian Rupees is 80 in spot market. Pound commands 2.5% premium per annum.

(a)    Calculate 6 months forward rate

(b)   If interest rate in India for 6 months deposit is 8% per annum. Calculate interest rate per annum in Britain (for 6 months deposits)

(Ans.: (a) GBP INR 81. (b) 5.43%)

 

Q.2) USD INR 48 Spot

Interest rates: India 9% per annum and US of A 4.7835% per annum.

(a)    Calculate 3 months forward rate

(b)   Calculate AFM.

(Ans.: 48.50 and 4.17%)

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