All Questions carry equal marks.
All Questions are compulsory
All answers to be explained in not more than 1000 words for question 1 and 2 and for
question 3 in not more than 500 words for each subsection. Use relevant examples,
illustrations as far as possible.
All answers to be written individually. Discussion and group work is not advisable.
Students are free to refer to any books/reference material/website/internet for
attempting their assignments, but are not allowed to copy the matter as it is from the
source of reference.
Students should write the assignment in their own words. Copying of assignments from
other students is not allowed.
Students should follow the following parameter for answering the assignment questions.
1. ABC Limited, an Indian Company has an export exposure of 10 million Yen. Yen is
not directly quoted against the Rupee. The current spot rates are USD/INR = 41.79 and
For Theoretical Answer
Assessment Parameter Weightage
Introduction 20%
Concepts and Application
related to the question
60%
Conclusion 20%
For Numerical Answer
Assessment Parameter Weightage
Understanding and usage
of the formula
20%
Procedure / Steps 50%
Correct Answer &
Interpretation
30%USD/JPY =129.75. It is estimated that Yen will depreciate to 144 level and Rupee to
depreciate against Dollar to 43. The Forward rate for September 2020 USD/YEN =
137.35 and USD/INR 42.89. Given that the actual spot rate on 30 September 2020 was
USD/YEN = 137.85 and USD/INR = 42.78, is the decision to take forward cover
justified in hindsight? (10 Marks)
2. Identify which party is playing what role in the following Letter of Credit transaction.
ABC Limited wants to import raw material from Z123 Limited, a supplier in Germany
who banks with T.R.V. Bank. The supplier insists that ABC Limited issue a Letter of
Credit for the full value of the transaction. A tenure of 90 days is agreed upon. ABC
Limited approaches N.O.P. Bank to issue a Letter of Credit. You are required to
identify the steps involved in a Letter of Credit transaction. Also Identify which party is
playing the role of
Issuing Bank
Beneficiary
Applicant
Beneficiary Bank
(10 Marks)
3. The prevailing market rates are as follows.
INR/USD = Rs. 77.00
Interest rate for a 6 month loan in India = 12% per annum
Interest rate for a 6 month loan in USA = 6% per annum
a. Explain the concept of Interest Rate Parity. What will be the expected 6 -months
forward rate for US dollar in India? (5 Marks)b. Compute the Forward premium/discount of USD/INR in the Indian Forex Market?
(5 Marks)