International Finance: NMIMS April 2019 Assignments: Contact us for solutions at assignmentssolution@gmail.com

NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: International Finance
Internal Assignment Applicable for April 2019 Examination
Assignment Marks: 30


1. You are given the following interest rates.

Rs.	$
3- months	15%	6%
6-month	14.5%	5.5%
9-month	14%	5.0%

The 3-month forward rate is Rs. 36/$. Calculate the 3-month forward rate 6-months
from now. (10 Marks)
2. ABC Ltd. is planning to import a multi-purpose machine from Japan at a cost of 3400
lakhs yen. The company can avail loan at 18% interest per annum compounded
quarterly with which it can import the machine. However there is an offer from Tokyo
branch of an India based bank extending credit of 180 days at 2% per annum against
opening of an irrevocable letter of credit. Other information:-
Present exchange rate Rs. 100 = 340 yen
180 days forward rate Rs. 100 = 345 yen
Commission charges for letter of credit at 2% per 12 months.
Advise whether the offer from the foreign branch should be accepted?
(10 Marks)
3 A) Suppose the spot rate is $ 0.20/FF. The US one-year rate is 6%. The forward rate is $
0.1923/FF.
What is the current one-year French interest rate that will satisfy the Interest Rate Parity?
Suppose the one-year French interest rate is 12% instead. What kind of arbitrage would
you perform to take advantage of this opportunity?
(5 Marks)
3 B) Assume that the Citibank trading room is dealing on the following quotations Spot
Sterling = $1.5000, Euro-Sterling interest rate (6-months) = 11.00% p.a. Euro-$
interest rate (6-months) = 6.00% p.a. and that Barclays Bank is quoting Forward
Sterling (6-months) at $1.4550.
NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: International Finance
Internal Assignment Applicable for April 2019 Examination
Describe the transactions you would make to earn risk-free covered interest
arbitrage profits? How much profit would you expect to make?
(5 Marks)