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Microsoft power point   module 2, 1 [compatibility mode]

Microsoft power point module 2, 1 [compatibility mode]






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    Microsoft power point   module 2, 1 [compatibility mode] Microsoft power point module 2, 1 [compatibility mode] Presentation Transcript

    • International financial Management HARISHA.B.V.AIP(FINANCE AND CONTROL) IIM BANGALORE Harisha.B.V.AIP(finance & control) MODULE 2 IIMB
    • Module 2• Foreign exchange markets-• Functions• Participants• Currency derivatives• interest rate futures• Speculations. Harisha.B.V.AIP(finance & control) IIMB
    • Foreign exchange markets• The foreign exchange market is that in which currencies are bought and sold against each other.• The bulk of this is accounted for a small number of currencies –US dollar,deutsche mark, yen, pound ,Swiss franc, Canadian dollar,Dutch guider,Italian lira,Belgian franc,euro. Harisha.B.V.AIP(finance & control) IIMB
    • Over the counter market• Foreign exchange market is an over the counter market.• The market spans all the time zones of the world and function virtually round the clock,enabling a trader to offset a position created in one market using another market.• The major ones are London, New York, Tokyo,Zurich,Frankfurt,Hong Kong, and Singapore. Harisha.B.V.AIP(finance & control) IIMB
    • Structure of foreign exchange market• It is made up of• Retail market-travellers and tourists and other individuals uses this market.the total turnover and average size are very small.• Wholesale market- this is interbank market.commercial banks,investment banks,corporations and central bank participate.the average transaction and size is very large. Harisha.B.V.AIP(finance & control) IIMB
    • Primary price markers and secondary price makers• Primary price makers or professional dealers make a two way market to each other and to their clients.they will give a two way price .They make the prices.• First tier consists of a giant MNB deal in a large number currencies in large amounts and often deal directly with each other without using brokers.• The second tier are large banks who deal in a smaller number of currencies and use the services of brokers more often. IIMB & control) Harisha.B.V.AIP(finance
    • Secondary price makers• Secondary price makers are entities which make foreign exchange prices but do not make a two way market(RETAIL MARKET).• Restaurants , hotels, shops catering to tourists buy foreign currency in payment of bills. Harisha.B.V.AIP(finance & control) IIMB
    • Other important points• The spread between buying and selling prices with secondary price makers or retail market will be large when compared to wholesale or primary price makers.• Foreign exchange brokers act as middle men between two market makers. The brokers do not buy or sell on their own account. Harisha.B.V.AIP(finance & control) IIMB
    • Role of central banks• Central banks intervene in the market from time to time to attempt to move exchange rates in a particular direction. Harisha.B.V.AIP(finance & control) IIMB
    • Contribution of volume• Cross border exchanges of goods and services account for a very small proportion .• The large volume will be from capital account .• As banks usually aim to maintain square or near square positions, a lot of turnover is simple attributable to banks offsetting their positions. Harisha.B.V.AIP(finance & control) IIMB
    • speculators• There is no distinct class of speculators in the foreign exchange market.• Price making banks often carry uncovered positions to profit from exchange rate movements.• A non financial corporations which does not hedge its foreign currency export receivable or import payable is as much a speculator. Harisha.B.V.AIP(finance & control) IIMB
    • The mechanics of currency trading• The international standard organization has developed three letter codes.• USD-US DOLLAR’• GBP-GREAT BRITAIN POUND• JPY-JAPANESE YEN• CHF-SWISS FRANC• SEK-SWEDISH KRONER• CAD-CANADIAN DOLLAR• BEF-BELGIAN FRANC• NLG-DUTCH GUIDER• DEM-DEUTSCHE MARK• SAR-SAUDI RIYAL Harisha.B.V.AIP(finance & control) IIMB
    • Inter bank dealing• A typical spot transaction• Monday 21 sep 10.45 a.m.• Bank A: EUR –USD please• Bank B: ’40-45’ Harisha.B.V.AIP(finance & control) IIMB
    • •Bank B is specifying a two way price, it isquoting last two digits.•The actual price will be 0.8740/0.8745•The last two digits are called ‘points or pips’.•Then bank A says ‘mine’(willing to buy)•If it wants to sell then it might have said ‘yours’ Harisha.B.V.AIP(finance & control) IIMB
    • Warehousing deal and Back to Back dealing• When Bank B gives the quote which is based on information about the current market it is called as warehousing deal.• When B calls C and gets the quote and then gives to A .If A does a deal, B will immediately offset it with C.this is back to back dealing. Harisha.B.V.AIP(finance & control) IIMB
    • Short and long positions• If any bank has sold more then what it has bought it is said to have a net short position.• If any bank has bought more then what it has sold it is said to have a net long position. Harisha.B.V.AIP(finance & control) IIMB
    • SWIFT• Society for World wide Interbank Financial Telecommunication.• This is non profit Belgian co operative with main and regional centers around the world connected by data transmission lines.• When bank deals through brokers,they transmit their buy and sell orders to a broker who shows them to the market without revealing the identities of the parties. Harisha.B.V.AIP(finance & control) IIMB
    • Types of transactions• The day on which transfers are effected is called the settlement date or the value date.• The three types of market or transactions are• Spot• Forward• Swap.( a combination of spot and forward) Harisha.B.V.AIP(finance & control) IIMB
    • Value dates or settlement dates• Spot transaction is normally T+2 days.• Forward contract maturities are normally 1 , 2, 3, 6, 9, 12 months.• Swap transaction If a bank A purchases USD from Bank B spot,and simultaneously enter into forward transaction with the same counter party to sell USD after 1 month. Harisha.B.V.AIP(finance & control) IIMB
    • Outright forward and forward forward swap• Forward contracts without an accompanying spot deal are known as outright forward contracts.• A one month forward purchase of USD against GBP coupled with three months Forward sale of USD against GBP is forward forward swap. Harisha.B.V.AIP(finance & control) IIMB
    • Exchange rate quotations and arbitrageQuotation will be given either on• European terms(quotes given as number of units of a currency per US dollar.example INR 45/ USD• American terms(quotes given as number of US dollars per unit of currency.example USD 1.6525/ GBP) Harisha.B.V.AIP(finance & control) IIMB
    • Direct and indirect quotes• Direct quotes- it give units of the home currency per unit of foreign currency.example INR 45/ USD• Indirect quotes – number of units of foreign currency per unit of the home currency.example USD 2.051010/ INR 100 Harisha.B.V.AIP(finance & control) IIMB
    • Bid ask spreads• A bid is the price at which dealer will buy one currency for another currency.• Ask is the price at which dealer will sell one currency for another currency• The difference between bid and ask is called as spread which will the dealer’s margin. Harisha.B.V.AIP(finance & control) IIMB
    • Example• USD/CHF spot: 1.4550/ 1.4560• Dealer will buy at 1.4550• Dealer will sell at 1.4560• Spread = 1.4560-1.4550• Percentage spread = (1.4560-1.4550)/1.4560* 100• Quotations are generally shortened to 1.4550/60 Harisha.B.V.AIP(finance & control) IIMB
    • Arbitrage• Arbitrage in finance refers to a set of transactions, selling and buying or lending or borrowing the same asset or equivalent groups of assets ,to profit from price discrepancies within a market or across markets.• Equivalent here means having identical cash flows and risk characteristics. Harisha.B.V.AIP(finance & control) IIMB
    • Arbitraging between banks• Though the term market rate is used there is no one single market rate among all the banks.• The rate will be close to each other .• Obviously such a situation gives rise to arbitrage opportunity. Harisha.B.V.AIP(finance & control) IIMB
    • Example• Bank A is quoting GBP/USD 1.4550/1.4560• Bank B is quoting GBP/USD 1.4538/1.4548Here there is a possibility of arbitrage Harisha.B.V.AIP(finance & control) IIMB
    • Example 2• Bank A GBP/ USD 1.4550/1.4560• Bank B GBP/USD 1.4545/1.4555Here there is no arbitrage possibilities.What is its implications? Harisha.B.V.AIP(finance & control) IIMB
    • Inverse quotes and two point arbitrage• BANK IN NEW YORK USD/ AUD 1.8885/90( SPOT )• BANK IN ZURICH AUD/USD: 0.5275/0.5280(SPOT)IS THERE ANY ARBITRAGE? Harisha.B.V.AIP(finance & control) IIMB
    • CROSS RATES• An exchange rate between two currencies that is derived from the exchange rates of those currencies with a third currency is known as a cross rate. Harisha.B.V.AIP(finance & control) IIMB
    • Example• GBP/USD ; 1.6545/1.6552• EUR/USD: 1.3655/1.3665• WHAT IS GBP/EUR?• GBP/EUR bid = (GBP/USD) bid * (USD/EUR)bid• GBP/EUR ask = (GBP/USD) ask * (USD/EUR)ask Harisha.B.V.AIP(finance & control) IIMB
    • Triangular ArbitrageGBP 1 = USD 1.96 IN NEW YORKGBP 0.2 = 1 DEM IN LONDON2.5 DEM = USD 1 IN FRANKFURT. Harisha.B.V.AIP(finance & control) IIMB
    • COVERED INTEREST RATE ARBITRAGE• Spot Rate 50 Rs = 1$• Interest rate in India 8%• Interest rate in US is 12.5%• One year forward rate is 48 RS. Harisha.B.V.AIP(finance & control) IIMB
    • Golden rule• If the interest rate differential is greater than the premium or discount. place the money in the currency that has higher rate of interest or vice versa.• Interest rate differential = difference between two countries. Harisha.B.V.AIP(finance & control) IIMB
    • Forward premium or discount• (Forward rate – spot rate) / spot rate * 100 * 12/N Harisha.B.V.AIP(finance & control) IIMB
    • Example• Spot rate RS 42.0010 = $ 1• 6 month forward rate : RS 42.8020• Annualized interest rate on 6 month rupee=12%• Annualized interest rate on 6 month dollar = 8%• Calculate the arbitrage possibilities assuming 1000 $ as investment. Harisha.B.V.AIP(finance & control) IIMB
    • Swap markets –exchange rate determination• A typical swap quotations appears as follows• USD/CHF SPOT 1.6265/75• 1- MONTH SWAP 15/8 Harisha.B.V.AIP(finance & control) IIMB
    • PROBLEM• USD/INR SPOT 48.75/80• 2 MONTH SWAP 12/20• USD/JPY SPOT 125.50/126.10• 2 MONTH SWAP 20/15• FIND INR/JPY 2 MONTH OUTRIGHT Harisha.B.V.AIP(finance & control) IIMB
    • Derivatives• A derivative is a two party contract whose value is derived from the value of an underlying asset.• The underlying asset may be Index, stock, currency, interest rate, commodity.• In finance derivatives means a financial product which has been derived from a market .• It has no independent existence. Harisha.B.V.AIP(finance & control) IIMB
    • Types of derivatives• Futures (Forwards)• Options• Swaps ? Harisha.B.V.AIP(finance & control) IIMB
    • Derivatives products MARKET CREATED PRODUCTS USED FOR HEDGING THE PRICE VARIATION RISK –Often investors split the risk of underlying position into several components and manage the risk which they don’t want to have through derivatives TWO TYPES OF DERIVATIVE PRODUCTS –PRODUCTS WHICH ENSURE A FIXED PRICE (FUTURES) –PRODUCTS WHICH ELIMINATES DOWNSIDE RISK OF THE PRICE (OPTIONS) DERIVATIVE PRODUCTS EXIST ON BOTHCOMMODITY AND FINANCIAL PRODUCTS Harisha.B.V.AIP(finance & control) IIMB
    • •Exchange-traded futures and options –standardized products –trading floor or computerized trading –virtually no credit risk•Over-the-Counter forwards, options, & swaps –often non-standard (customized) products –telephone (dealer) market –some credit risk Harisha.B.V.AIP(finance & control) IIMB
    • Uses of Derivatives• To hedge or insure risks; i.e., shift risk.• To reflect a view on the future direction of the market, i.e., to speculate.• To lock in an arbitrage profit• To change the nature of an asset or liability.• To change the nature of an investment without incurring the costs of selling one portfolio and buying another. Harisha.B.V.AIP(finance & control) IIMB
    • Currency future• At a glance a currency future like a forward contract is a contract for future delivery.• A currency future is the price of a particular currency for settlement at a specified future date.• The two popular future exchanges are the Singapore international Monetary Exchange (SIMEX) and International Money Market (Chicago, IMM). Harisha.B.V.AIP(finance & control) IIMB
    • Features of futures contract•Futures are traded on organized exchanges.•Clearing house•Futures are traded through brokers.•The contracts are standardized.•margins•Marking to market•Actual delivery is rare Harisha.B.V.AIP(finance & control) IIMB
    • System of Margins•Initial margin : When position is opened•Variation Margin: Settlement of daily gains and losses•Maintenance Margin : Minimum balance in margin account.Balance falls below this, margin call issued. If not met,position liquidated.•Regulators specify minimum margins between clearingmembers and clearinghouse. Margins at other levelsnegotiated• Margins can be deposited in cash or specified securities suchas T-bills. Interest on securities continues to accrue to owner.Margin is a performance bond.•Levels of margins may be changed if volatility increases. Harisha.B.V.AIP(finance & control) IIMB
    • System of Margins• With clearing house guarantee, buyer-seller need notworry about each other’s creditworthiness.• Standardized contracts with margin system increaseliquidity.Protects clearing house; enhances financialintegrity of the exchange. Credit risk issuesalmost eliminated Harisha.B.V.AIP(finance & control) IIMB
    • Futures and Forwards: A Comparison Table Futures Forwards Default Risk: Borne by Clearinghouse Borne by Counter-Parties What to Trade: Standardized Negotiable The Forward/Futures Agreed on at Time Agreed on at Time Price of Trade Then, of Trade. Payment at Marked-to-Market Contract Termination Where to Trade: Standardized Negotiable When to Trade: Standardized Negotiable Liquidity Risk: Clearinghouse Makes it Cannot Exit as Easily: Easy to Exit Commitment Must Make an Entire New Contrtact How Much to Trade: Standardized Negotiable What Type to Trade: Standardized Negotiable Margin Required Collateral is negotiable Typical Holding Pd. Offset prior to delivery control) Delivery takes place Harisha.B.V.AIP(finance & IIMB
    • Theoretical Futures PriceLet C denote the present value of carrying costs, St thespot price, r the interest rate, and FUt,T the futures pricefor delivery at T, Then theoretical futures price is givenby FUt,T = (St + C)[1 + r(T-t)] Harisha.B.V.AIP(finance & control) IIMB
    • Futures and Forwards on Currencies• A foreign currency is analogous to a security providing a dividend yield• The continuous dividend yield is the foreign risk- (r−rf )T free interest rate• It follows that if rf is the F =Se 0 0 foreign risk-free interest ( r −rf ) T rate F =Se 0 0 Harisha.B.V.AIP(finance & control) IIMB
    • In practice futures price does not exactly equaltheoretical futures price. Reasons:1 Transaction costs – bid-offer spreads, brokerage2 In some cases, restrictions on short sales (Does notapply to currency futures)3 Non-constant interest rates4 Mark-to-market gains/losses. Harisha.B.V.AIP(finance & control) IIMB
    • Hedging Fundamentals•Hedging with futures/forwards typically involves taking a position in a futuresmarket that is opposite the position already held in a cash market.•A Short (or selling) Hedge: Occurs when a firm holds a long cash position andthen sells futures/forward contracts for protection against downward price exposurein the cash market.•A Long (or buying) Hedge: Occurs when a firm holds a short cash position andthen buys futures/forward contracts for protection against upward price exposure inthe cash market. Also known as an anticipatory hedge.•A Cross Hedge: Occurs when the asset underlying the futures/forward contractdiffers from the product in the cash position.•Firms can hold long and shortHarisha.B.V.AIP(finance & control) for different price risks). hedges simultaneously (but IIMB
    • Options Terminology• The two parties to an option contract are theoption buyer and the option seller also calledoption writer•Call Option: A call option gives the optionbuyer the right to purchase a currency Y againsta currency X at a stated price Y/X, on or beforea stated date.•Put Option: A put option gives the option buyerthe right to sell a currency Y against a currencyX at a specified price on or before a specifieddate Harisha.B.V.AIP(finance & control) IIMB
    • Options Contracts: PreliminariesAn option gives the holder the right, but not the obligation,to buy or sell a given quantity of an asset in the future, atprices agreed upon today.•Calls vs. Puts –Call options gives the holder the right, but not the obligation, to buy a given quantity of some asset at some time in the future, at prices agreed upon today. –Put options gives the holder the right, but not the obligation, to sell a given quantity of some asset at some time in the future, at prices agreed upon today. Harisha.B.V.AIP(finance & control) IIMB
    • Options Terminology• A call option is said to be at-the-money if Current Spot Price (St ) = Strike Price (X),• in-the-money if St > X and out-of-the-money if St < X• A put option is said to be at-the-money if• St = X, in-the-money if St < X and out-of-the- money if St > X• In the money options have positive intrinsic value; at-the-money and out-of-the money options have zero intrinsic value. Harisha.B.V.AIP(finance & control) IIMB
    • Options Contracts: Preliminaries•European vs. American options –European options can only be exercised on the expiration date. –American options can be exercised at any time up to and including the expiration date. –Since this option to exercise early generally has value, American options are usually worth more than European options, other things equal. Harisha.B.V.AIP(finance & control) IIMB
    • A CALL OPTIONA trader buys a call option on US dollar with a strike price ofRs.46.50 and pays a premium of Rs.1.50. The current spot rate, St,is Rs.45.50. His gain/loss at time T when the option expiresdepends upon the value of the spot rate, ST, at that time : ST Gain(+)/Loss(-) 44.5000 -Rs.1.50 45.0000 -Rs.1.50 45.5000 -Rs.1.50 46.0000 -Rs.1.50 46.5000 -Rs.1.50 47.0000 -Rs.1.00 47.5000 -Rs.0.50 48.0000 Rs.0.00 48.5000 +Rs.0.50 49.0000 +Rs.1.00 Harisha.B.V.AIP(finance & control) 49.5000 +Rs.1.50 IIMB
    • PUT OPTIONA trader buys a put option on pound sterling at a strike price of$1.7500, for a premium of $0.07 per sterling. The spot rate at thetime is $1.7465. At expiry, his gains/losses are as follows : ST Gain(+)/Loss(-) 1.6000 +$0.0800 1.6300 +$0.0500 1.6500 +$0.0300 1.6600 +$0.0200 1.6800 $0.0000 1.6900 -$0.0100 1.7300 -$0.0500 1.7500 -$0.0700 1.7700 -$0.0700 1.8000 -$0.0700 Harisha.B.V.AIP(finance & control) IIMB
    • Option Payoff LONG CALL SHORT CALL LONG PUT SHORT PUT Harisha.B.V.AIP(finance & control) IIMB
    • The BSOPM Formulac = S 0 N ( d 1 ) − K e − rT N ( d 2 )p = K e − rT N ( − d 2 ) − S 0 N ( − d 1 ) ln( S 0 / K ) + ( r + σ 2 / 2 )Twhere d 1 = σ T ln( S 0 / K ) + ( r − σ 2 / 2 )T d2 = = d1 − σ T σ Twhere N(di) = the cumulative standard normal distributionfunction, evaluated atHarisha.B.V.AIP(finance & control) di, and: IIMB
    • Black scholes• C = S N(d1) - E e -rt N(d2)•• C = CALL VALUE• r = RISK-FREE RATE• S = CURRENT MARKET PRICE• t = TIME TO EXPIRATION• E = EXERCISE PRICE• N(d) = Cumulative normal probability density function• d1 = {ln(S/E) + (r + 0.5 VAR) t} / {SD * SQRT(t)}• d2 = d1 - {SD * SQRT(t)} Harisha.B.V.AIP(finance & control) IIMB
    • Computing Volatility• Find the daily return of the stock over a period • Rt = ln(Pt/Pt-1)• Find the Standard Deviation of daily returns as computed in the above step• This is standard deviation of daily return• To annualise the standard deviation of daily return, – SD (daily return) * SQRT(250) where 250 refers to number of trading days in a year. Harisha.B.V.AIP(finance & control) IIMB
    • Formulas for Currency Options − rf T − rTc = S 0e N ( d 1 ) − Ke N (d 2 ) − rT −rf Tp = Ke N (− d 2 ) − S 0e N ( − d1 ) ln( S 0 / K ) + ( r − r + σ 2 / 2 )T fwhere d 1 = σ T ln( S 0 / K ) + ( r − r − σ 2 / 2 )T f d2 = σ T Harisha.B.V.AIP(finance & control) IIMB
    • Alternative Formulas (r −rf )TUsing F0 = S 0 e − rTc = e [ F 0 N ( d 1 ) − KN ( d 2 )]p = e − rT [ KN ( − d 2 ) − F 0 N ( − d 1 )] 2 ln( F 0 / K ) + σ T / 2d1 = σ Td 2 = d1 − σ T Harisha.B.V.AIP(finance & control) IIMB
    • Elementary Option Strategies•Spread Strategies –Bullish Call Spread: Consists of selling the call with the higher strike price and buying the call with the lower strike price –Bearish Call spread: If the investor expects the foreign currency to depreciate, he can adopt the reverse strategy viz. buy the higher strike call and sell the lower strike call –Bullish Put Spread: Consists of selling puts with higher strike and buying puts with lower strike –Bearish Put Spread: Opposite of Bullish Put Spread –These strategies, involving options with same maturity but different strike prices are called vertical or price spreads Harisha.B.V.AIP(finance & control) IIMB
    • Bull Spread Using CallsProfit ST K1 K2 Harisha.B.V.AIP(finance & control) IIMB
    • Bull Spread Using PutsProfit K1 K2 ST Harisha.B.V.AIP(finance & control) IIMB
    • Butterfly Spreads This is an extension of the idea of vertical spreads. Supposethe current spot rate NZD/USD is 0.6000. The call options withsame expiry date are available : Strike Premium 0.58 0.07 0.62 0.03 0.66 0.01A butterfly spread is bought by buying two calls with themiddle strike price of 0.62, and writing one call each with strikeprices on either side, here, 0.58 and 0.66. The profit table is asbelow : Harisha.B.V.AIP(finance & control) IIMB
    • Butterfly Spread Using Calls Profit K1 K2 K3 ST Harisha.B.V.AIP(finance & control) IIMB
    • Butterfly Spread Using PutsProfit K1 K2 K3 ST Harisha.B.V.AIP(finance & control) IIMB
    • Elementary Option Strategies•Straddles and Strangles – Volatility Bets –A long straddle consists of buying a call and a put both with identical strikes and maturity. Usually both are at-the-money. –A long strangle consists of buying an out-of-the- money call and an out-of-the-money put –Both are bets that the underlying price is going to make a strong move up or down I.e. market is going to be more volatile. Harisha.B.V.AIP(finance & control) IIMB
    • Delta Delta (D) is the rate of change of the option price withrespect to the underlying .Theta• Theta (Θ) of a derivative (or portfolio of derivatives) is the rate of change of the value with respect to the passage of time• The theta of a call or put is usually negative. This means that, if time passes with the price of the underlying asset and its volatility remaining the same, the value of the option declines
    • Gamma• Gamma (Γ) is the rate of change of delta (∆) with respect to the price of the underlying asset• Gamma is greatest for options that are close to the money Harisha.B.V.AIP(finance & control) IIMB
    • Vega• Vega (ν) is the rate of change of the value of a derivatives portfolio with respect to volatility• Vega tends to be greatest for options that are close to the money Harisha.B.V.AIP(finance & control) IIMB
    • Rho • Rho is the rate of change of the value of a derivative with respect to the interest rate • For currency options there are 2 rhos Harisha.B.V.AIP(finance & control) IIMB
    • Forward Rate Agreements (FRAs)•A FRA is a forward contract on an interest rate (not on abond, or a loan).•The buyer of a FRA profits from an increase in interestrates. The seller of a FRA profits from a decline in rates.•The buyer effectively has agreed to borrow an amount ofmoney in the future at the stated forward (contract) rate. Theseller has effectively locked in a lending rate.•FRA’s are cash settled. Harisha.B.V.AIP(finance & control) IIMB
    • Forward Rate Agreements (FRAs)•Only the difference in interest rates is paid. The principalis not exchanged.•FRAs are cash settled. Harisha.B.V.AIP(finance & control) IIMB
    • An Example of an FRA•A firm sells a 5X8 FRA, with a NP of $300MM, and acontract rate of 5.8% (3-mo. forward LIBOR).•On the settlement date (five months hence), 3 mo.spot LIBOR is 5.1%.•There are 91 days in the contract period (8-5=3months), and a year is defined to be 360 days.•Five months hence, the firm receives: Harisha.B.V.AIP(finance & control) Source- debousfky IIMB
    • FRA Example (continued)•$524,077.11, which is calculated as: (300,000,000)(0.058-0.051)(91/360) (300,000,000)(0.058-0.051)(91/360) (300,000,000)(0.058-0.051)(91/360) 1+[(0.051)(91/360)]= 300000000*(.058-.051)(91/360) 1+[(0.051)(91/360)] 1+[(0.051)(91/360)] 1+(.051*91/360) Harisha.B.V.AIP(finance & control) IIMB