Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance International and Trade – I - exam paper

Says $2138365

Convert into Can$ at six months forward buying rate of 1.2065

= 2138365 ´ 1.2065

= $2579937.37 says $2579937

Return after six months = 2579937 – 2500000 = Can $79937

III. Investment in £

Can $/£ spot bid rate = 1.1922´ 1.7674 = 2.1071

Can$/£ spot ask rate = 1.1925 ´ 1.7677 = 2.1080

Can $/£ six months forward bid rate = 1.2065 ´ 1.7600 = 2.1234

Can $/£ six months forward ask rate = 1.2068 ´ 1.7603 = 2.1243

Surplus of Can$ 2.5 million is to be converted into pounds and the amount is invested at 5.6% for six months by covering at six month forward rate. Can$2500000 converted into pounds at Can$/£ spot selling rate

=

Amount received in pounds = 1185958.25 say £1185958

Invest at 5.6% for six months = 1185958 ´

= £1219164.82 says £1219165

Convert into Can$ at six months forward buying rate of 2.1234

= 1219165 ´ 2.1234

= 2588774.96 says Can$ 2588775

Return after six months = 2588775 – 2500000 = Can$ 88775

IV. Investment in Euro

Can$ / Euro spot bid rate = 1.1922´ 1.7674 ´ = 1.4230

Can$ / Euro spot ask rate = 1.1925 ´ 1.7677 ´ = 1.4239

Can$ / Euro six months forward bid rate = 1.2065 ´ 1.7600 ´ = 1.4422

Can$ / Euro six months forward ask rate = 1.2068 ´ 1.7603 ´= 1.4431

Surplus of Can$ 2.5 million is to be converted into Euro and the amount is invested in Euro at 6% for 6months by covering at six months forward rate.

Can$ 2500000 converted into euro at Can$ / Euro spot selling rate =

Amount received in Euro = 1755741.27 say 1755741

Invest at 6% for six months = 1755741 ´

= 1808413.23 says 1808413

Convert into Can$ at six months forward buying rate of 1.4422

= 1808413 ´ 1.4422

= 2608093.23 says Can$ 2608093

Earning:   Approval pending.