| ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS) | ||||||||||||||||||||
| END SEMESTER EXAMINATION –SEPT/OCT.2015 | ||||||||||||||||||||
| M.I.B. –III SEMESTER | ||||||||||||||||||||
| P211303: FOREIGN EXCHANGE MANAGEMENT | ||||||||||||||||||||
| Duration: 3 Hours Max. Marks: 100 | ||||||||||||||||||||
| SECTION – A | ||||||||||||||||||||
| I. | Answer any SEVEN questions. Each carries 5 marks. (7×5=35) | |||||||||||||||||||
| 1. | Explain the functions & features of foreign exchange market. | |||||||||||||||||||
| 2. | Write a note on the structure of Forex Market in India. | |||||||||||||||||||
| 3. | Explain the different types of arbitrage. | |||||||||||||||||||
| 4. | Write in detail Interest rate parity theory. | |||||||||||||||||||
| 5. | Briefly explain the different types of Foreign exchange exposure. | |||||||||||||||||||
| 6. | Explain the different types of interest rate risks. | |||||||||||||||||||
| 7. | Briefly explain Yield curve based techniques of managing interest rate exposure. | |||||||||||||||||||
| 8. | Explain the trading process with reference to Currency future contracts. | |||||||||||||||||||
| 9. | Explain the different types of options. | |||||||||||||||||||
| 10. | Distinguish between forward and futures contract. | |||||||||||||||||||
| SECTION – B | ||||||||||||||||||||
| II. | Answer any THREE questions. Each carries 15 marks. (3×15=45) | |||||||||||||||||||
| 11. | Briefly explain all the techniques (External & Internal) of Managing transaction exposure. | |||||||||||||||||||
| 12. | Briefly explain the Purchasing Power Parity theory and the International Fisher’s Effect. | |||||||||||||||||||
| 13. | Write short notes on:
a) Interest rate futures b) Interest rate swaps c) Interest rate caps d) Interest rate collars e) Interest rate corridors |
|||||||||||||||||||
| 14. | Currently, the spot exchange rate is $1.50/£ and the three-month forward exchange rate is $1.52/£. The three-month interest rate is 8.0% per annum in the U.S. and 5.8% per annum in the U.K. Assume that you can borrow as much as $1,500,000 or £1,000,000.
a. Determine whether the interest rate parity is currently holding. b. If the IRP is not holding, how would you carry out covered interest arbitrage? Show all the steps and determine the arbitrage profit. c. Explain how the IRP will be restored as a result of covered arbitrage activities. |
|||||||||||||||||||
| 15. | Omni Advisors, an international pension fund manager, uses the concepts of purchasing power parity (PPP) and the International Fisher Effect (IFE) to forecast spot exchange rates.
Omni gathers the financial information as follows:
Calculate the following exchange rates (ZAR and USD refer to the South African and U.S. dollar, respectively). a. The current ZAR spot rate in USD that would have been forecast by PPP. b. Using the IFE, the expected ZAR spot rate in USD one year from now. c. Using PPP, the expected ZAR spot rate in USD four years from now. |
|||||||||||||||||||
| SECTION – C | ||||||||||||||||||||
| III. | Case Study (1×20=20) | |||||||||||||||||||
| 16. | On 20th May a bank’s customer tenders a 30 days sight bill drawn under a letter of credit, in his favour opened by the bank’s Singapore branch. The bill is for Singapore dollars 100,000 drawn on Hongkong. The customer desires to retain 25% of the proceeds of the bill in foreign exchange.
Assuming SGD are quoted in Singapore market as under:
USD are quoted in the interbank market as under:
a. What rate will the bank quote to the customer? b. The bank requires an exchange margin of 0.10%, Transit period is 20 days. Interest on post shipment finance is 10%. c. Also calculate the rupee amount payable to the customer. |
|||||||||||||||||||
Latest Govt Job & Exam Updates: