Q.1) The following quote is given.
USD 1 = CAD 1.1630/50.
Identify the country in which this is a direct quote.
Find the mid rate, spread and the spread percentage.
Calculate the inverse quote.
Q.2) Cable Rate is GBP USD 1.6000 / 1.6070
In which country this is a direct quote?
Find the midrate, spread and the % spread. Calculate inverse quote.
Q.3) Following are the quotes given by a banker at Mumbai. Identify whether the quote is direct or
indirect quote. Compute the direct quote for indirect quote and vice versa.
1USD = Rs.45.85
Rs. 100 = GBP 1.2312
Rs. 100 = Euro 1.7850
Rs. 100 = USD 2.2002
1 Yen = Rs. 0.4129
Q.4) Consider the following quotes:
Spot (Euro / Pound) = 1.6543 / 1.6557.
Spot (Pound / NZ $) = 0.2786 / 0.2800.
a) Calculate the percentage spread on the Euro / Pound rate.
b) Calculate the percentage spread on the Pound / NZ $ rate.
c) The maximum possible percentage spread on the cross rate between the
euro and the NZ $.
Q.5) You have just graduated from the University of Florida and are leaving on a whirlwind tour to
see some friends. You wish to spend USD 1,000 each in Germany, New Zealand, and Great Britain
(USD 3,000 in total). Your bank oﬀers you the following bid-ask quotes: USD/EUR 1.304-1.305,
USD/NZD 0.67-0.69, and USD/GBP 1.90-1.95.
(a) If you accept these quotes, how many EUR, NZD, and GBP do you have at departure?
(b) If you return with EUR 300, NZD 1,000, and GBP 75, and the exchange rates are
unchanged, how many USD do you have?
(c) Suppose that instead of selling your remaining EUR 300 once you return home, you want
to sell them in Great Britain. At the train station, you are oﬀered GBP/EUR 0.66-0.68,
while a bank three blocks from the station oﬀers GBP/EUR 0.665-0.675. At what rate are
you willing to sell your EUR 300? How many GBP will you receive?
(a) EUR 766.28; NZD 1,449.27; GBP 512.82.
(b) 391.2 + 670 + 142.5 = USD 1203.7
(c) You will sell at GBP/EUR 0.665; you will receive GBP 199.5
FOREX SPOT AND FORWARD
Q.1) From the following USD INR quotations, calculate the likely quotations for
1 month 10 days forward and
3 month 25 days forward
Spot 1 month 3 months 6 months
47.1110/220 100/200 300/450 750/900
Q.2) ABN Amro’s Mid Rate is AED INR 12.80. Desired Spread is INR 0.04 (per Dirham
Standard Chartered has quoted a Spot Rate of USD INR 43.3040/43.4010
Standard Chartered’s Forward Rates are:
1 m Forward – 100/120.
2 m Forward – 139/201.
Citibank Quotes (Spot) EUR INR 51.2010/52.5050.
a) Calculate Bid-Ask Rate for ABN Amro.
b) Write forward quotes for 1 month and 2 months for Standard Chartered in Outright form.
c) Calculate forward rate for 1 month and 10 days for Standard Chartered.
d) Calculate cross rate $/€ from Standard Chartered and Citibank.
e) Is Rupee weakening?
Q.3) A bank is quoting
CHF/DEM 0.7865/78 spot
1 month forward 25/20 – 3 months forward 20/15
CHF/SEK 0.6348/56 1 month 40/45 – 3 months 60/70
Suppose ‘Reliance’ is willing to buy DEM/SEK
75 days, what rate probably the bank will quote?
Q.4) Following quotes are available in Mumbai:
(1) USD INR 39 (Spot) and USD INR 38 (6 month)
(2) EUR INR 57 (Spot) and EUR INR 59 (6 month)
Calculate annualized % Forward premium or discount on $ and Euro.
Q.5) A bank is quoting the following rates:
DEM/$ spot : 1.5975/80
2 - month : 20/10
3 - month : 25/15
Saudi Riyals/$ spot : 3-7550/60
2 - month : 20/40
3 – month : 30/40
A firm wishes to buy Riyals against DEM 3 month forward, what rate will the bank quote.
(done in class: Ans – EUR/GBP (F) = 1.7234/86)
Q.6) Mid Rate for Citibank is 43.5050 per dollar. Desired Spread is 0.0200 (per one Dollar
Transaction) Forward premium/discount for 1 month is 100/80 and for 2 month it is 150/120
Italian Bank quotes 1.4402/1.4490 Euros per Pound. StanChart quotes 2.4751/2.4792 Australian
Dollars per pound.
a) Calculate Bid and Ask rate for Citibank.
b) Write forward quotes of Citibank in outright form.
c) Calculate percentage Spread (Bid Ask Spread) for Italian Bank.
d) Calculate Cross rate for Australian Dollar per Euro using Italian and StanChart banks.
e) Is Rupee weakening against Dollar? Explain.
Q.7) Analyse the following report and answer the questions given below:
The INR opened 15 paise weaker at 48.7700 per USD and continued to depreciate during
the day due to heavy demand for USD. As the USD was weakening in the international market,
the fall in the value of the INR in terms of cross-rates was magnified due to the vehicle currency
effect. Demand was mainly due to ready import remittances and large ‘cash’ dollar transactions
were reported. There was no demand for forward maturities and therefore forward margins
remained stable. The 3 months Annualised Forward Margin (AFM) continued to be at 2%
throughout the day.
a) What was the previous day closing rate for 1 USD in terms of INR?
b) If spot 1 USD = INR 48.8060 and 3 months AFM = 2%. Calculate 3 months forward
value of 1 USD in terms of INR.
Q.8) Complete the following Table:
1 USD is Equal to 1 GBP is Equal to 1 CAD is Equal to
Q.9) Using following data, calculate exchange rate for CAD, CHF, GBP and EUR in terms of
Q.10) (a) Indian bank’s spot rate is 54.25 /€. It offers € at 3% annual forward discount.
Calculate its 6 months forward rate.
(a) Barclays Bank offers Canadian Dollar for £0.5005/0.5050 spot. Calculate percentage
spread of the bank.
(b) Bank A quotes 2.63 ¥ = Re. 1 Bank B quotes 0.51£ / C$. Identify the countries in which
these are direct quotes.
(c) 54.5050/54.5250 spot 3 month forward 75/50. Write forward rate in outright form.
Q.11) Complete the following table:
1 USD is equal to 1 GBP is equal to 1 CAD is equal to
Q.12) Complete the following table:
1 USD is equal to 1 GBP is equal to 1 EUR is equal to
Q.13) A Foreign Exchange trader gives the following quotes for the Belgian Franc spot, one month,
three months and six months to US based treasurer.
1$ = 0.02478/80 4/6 9/8 14/11
a) Calculate outright quotes for one, three and six month’s forwards.
b) If the treasurer wished to buy Belgian Franc three months forward, how much would he pay in $?
c) If he wished to purchase US Dollars one month forward, how much he pays to pay in Belgian
ARBITRAGE IN FOREX MARKETS
Q.1) (a) In London a dealer quotes:
DEM/GBP Spot 3.5250/55
JPY/GBP Spot 180.80/181.30
(i) What do you expect the JPY/DEM rate to be in Frankfurt?
(ii) Suppose that in Frankfurt you get a quote JPY/DEM spot 51.1530/51.2550, is there
an arbitrage opportunity?