Mohiuddin: 2016

Tuesday, 3 May 2016

EURUSD: 1.4351 / 1.4355; USDINR: 44.38 / 44.39. Calculate EURINR rate?

a) 64.6897 / 63.7218

b) 63.6897 / 63.7218

c) 63.6897 / 64.7218

d) 63.7997 / 63.6218

Explanation

EURUSD Bid rate * USDINR Bid rate: 1.4351 * 44.38 = 63.6897

EURUSD Ask rate * USDINR Ask rate: 1.4355 * 44.39 = 63.7218

A person has invested INR 100,000 in an Indian corporate bond for a year giving a return of 16% in one year. The person plans to use the proceeds from the maturity of corporate bond to fund his son's education on US. At the time of investing in the corporate bond, USDINR spot rate was 50 and one year premium was 4%. The person decides to hedge currency risk using USDINR one year futures. At the end of one year, how many USD can this person remit to his son?

A person has invested INR 100,000 in an Indian corporate bond for a year giving a return of 16% in one year. The person plans to use the proceeds from the maturity of corporate bond to fund his son's education on US. At the time of investing in the corporate bond, USDINR spot rate was 50 and one year premium was 4%. The person decides to hedge currency risk using USDINR one year futures. At the end of one year, how many USD can this person remit to his son?

a) 2320

b) 2417

c) 2083

d) 2231

Explanation

Investment INR 100,000, Return 16% : 100,000*16/100= 16000

Value after one year 100,000+16000= INR 116000

USDINR at that time was 50, Return 4%: 50*4/100= 2

USDINR after one year 52

Actual hedge 116000/52= 2230.76 (Nearest value 2231)

Mr. Mehta invested Rs 1,00,000 in UK Stock Markets when the GBPINR rate was 75. After one year his investment appreciated by 20% in GBP terms. He sold of his investments and repatriated the money to India at the then existing rate of 80. what was real returns in INR?

Mr. Mehta invested Rs 1,00,000 in UK Stock Markets when the GBPINR rate was 75. After one year his investment appreciated by 20% in GBP terms. He sold of his investments and repatriated the money to India at the then existing rate of 80. what was real returns in INR?

a) He has made a Profit of 20%

b) He has made a Loss of 20%

c) He has made a Profit of 28%

d) He has made a Loss of 28%

Explanation

Mr. Mehta invested Rs 1,00,000 in UK Stock when the GBPINR rate was 75

So he had invested 1,00,000/75 = 1333.33 pounds in UK Stocks

His investment grew by 20%: 1333.33*20% = 1333.33 + 266.66 = 1600

He Repatriating at GBPINR rate of 80: 1600*80 = 128000

Therefore his investment in INR terms have grown from Rs 1,00,000 to Rs 1,28,000

Return: 128000 - 100000 = 28000, Return in %: 28000*100/100000 = 28%

A person has invested USD 100,000 in US equities with a view of appreciation of US stock market. In next one year, his investments in US equities appreciated in value to USD120,000. The investor decided to sell off his portfolio and repatriate the capital and profits to India. At the time of investing abroad the exchange rate was 44.5 and at the time of converting USD back into INR, he received an exchange rate of 46. How much is the return on investment in USD and in INR respectively?

A person has invested USD 100,000 in US equities with a view of appreciation of US stock market. In next one year, his investments in US equities appreciated in value to USD120,000. The investor decided to sell off his portfolio and repatriate the capital and profits to India. At the time of investing abroad the exchange rate was 44.5 and at the time of converting USD back into INR, he received an exchange rate of 46. How much is the return on investment in USD and in INR respectively?

a) 20%, 16%

b) 20%, 24%

c) 20%, 20%

d) 20%, 18%

Explanation:

Invested value USD 100,000 after one year value USD 120000

Return on investment USD 120,000- USD 100,000= 20000,

% Return: 20000*100/10000= 20%

At time of investing abroad value 44.50*100,000= Rs 4450000

At the time of converting value 46*120,000= Rs 5520000

Return on investment 5520000-4450000= Rs 1070000

% Return: 1070000*100/4450000= 24%

A person has invested USD 100,000 in US equities with a view of appreciation of US stock market next one year, his investments in US equities appreciated in value to USD 115,000. The investor decided to sell off his portfolio and repatriate the capital and profits to India. However, at the time of converting USD to INR, he received an exchange price of 50 as against 47. what is the return of INR?

A person has invested USD 100,000 in US equities with a view of appreciation of US stock market next one year, his investments in US equities appreciated in value to USD 115,000. The investor decided to sell off his portfolio and repatriate the capital and profits to India. However, at the time of converting USD to INR, he received an exchange price of 50 as against 47. what is the return of INR?

a) 10%

b) 22%

c) 25%

d) 24%

Explanation:

The value of investing increased from USD 100,000 to USD 115,000 in one year. Therefore the return in USD would be: (115,000-100,000)/100,000=0.15 and in percentage terms it would be 15%.

In INR terms, the value of investment at the beginning was 4,700,000 and at maturity it is 5,750,000 (50*115,000). Therefore the return in INR is: (5,750,000-4,700,000)/(4,700,000)= 0.22 and in percentage terms it would be 22%

A person has invested USD 100,000 in US equities with a view of appreciation of US stock market next one year, his investments in US equities appreciated in value to USD 115,000. The investor decided to sell off his portfolio and repatriate the capital and profits to India. However, at the time of converting USD to INR, he received an exchange price of 44 as against 47. what is the return of the USD and INR?

a) 10%, 7%

b) 15%, 7.6%

c) 7.06, 10%

d) 10%, 5%

Explanation:

The value of investing increased from USD 100,000 to USD 115,000 in one year. Therefore the return in USD would be: (115,000-100,000)/100,000=0.15 and in percentage terms it would be 15%.

In INR terms, the value of investment at the beginning was 4,700,000 and at maturity it is 5,060,000 (44*115,000). Therefore the return in INR is: (5,060,000-4,700,000)/(4,700,000)= 0.076 and in percentage terms it would be 7.6%

A trader in India expects international gold prices to appreciate from USD 1500 per ounce to USD 1800 in next six months. To benefit from the view, he buys 30 grams of gold at Rupees 22,000 per gram and also sold 6 month USDINR futures at 46. After six months, gold prices appreciated to USD 1800 per ounce and the trader sold gold at Rupees 24,000 per gram and unwinds currency futures contract at 44. Assuming 1 ounce is equal to 3 grams, how many lots of currency futures would he have used to hedge the currency risk and how much was the real return for the investor?

A trader in India expects international gold prices to appreciate from USD 1500 per ounce to USD 1800 in next six months. To benefit from the view, he buys 30 grams of gold at Rupees 22,000 per gram and also sold 6 month USDINR futures at 46. After six months, gold prices appreciated to USD 1800 per ounce and the trader sold gold at Rupees 24,000 per gram and unwinds currency futures contract at 44. Assuming 1 ounce is equal to 3 grams, how many lots of currency futures would he have used to hedge the currency risk and how much was the real return for the investor?

a) 15 lots, 13%

b) 18 lots, 12%

c) 15 lots, 13.6%

d) 18 lots, 13.6%

Explanation:

Trader buys 30/3 =10 ounce & pays 1500*10 = 15000 USD. He has risk of USD depreciating so he is hedging of USD of 15000/1000 = 15 lot

He sold 6 months USDINR future contract at Rs 46 & squared it off at Rs 44.So he got benefit of (46-44) =2*1000*15 = 30000.

He buys gold in Rs 30*22000 =66000 & sold it on 30*24000 =720000. He got benefit of 720000-660000 = 60000. (in 6 months)

Total benefit during 6 months period = 30000+60000 = 90000

Percentage real rate of return would be (90000/660000)*100% = 13.6%

An exporter sells 10 lots of one month EURINR futures at 63. At the expiry, the settlement price was announced as 63.70. How much profit/loss (in Rupees) did he make on the transaction?

•An exporter sells 10 lots of one month EURINR futures at 63. At the expiry, the settlement price was announced as 63.70. How much profit/loss (in Rupees) did he make on the transaction?

Explanation: Sell Rate 63, Buy Rate 63.70.

63.70-63=0.70

0.70*1000*10= 7000 Loss

Mr. X, an active stock market investor decides to invest (Buy) USD 250000 for a period of 6 month in S&P 500. The spot USD/INR rate at that time was 48.25 and currency futures rate was.48.65. After 6 months, the market moves as per his expectation and his investment goes up by 15 %. If spot USD/INR exchange rate moves to 45.46 and currency futures rate moves to 45.95, what position he has to take in futures contracts and how much profit/loss he makes.

Mr. X, an active stock market investor decides to invest (Buy) USD 250000 for a period of 6 month in S&P 500. The spot USD/INR rate at that time was 48.25 and currency futures rate was 48.65. After 6 months, the market moves as per his expectation and his investment goes up by 15 %. If spot USD/INR exchange rate moves to 45.46 and currency futures rate moves to 45.95, what position he has to take in futures contracts and how much profit/loss he makes.

A. Long, Profit Rs. 1785300

B. Long, Loss Rs. 1753800

C. Short, Profit Rs. 1783500

D. Short, Loss Rs. 1753800

Ans: (C)

Explanation:

Mr. X investment USD 250000, return @ 15%, 250000*15/100 = 37500; 250000+37500 = 287500

Spot rate at the time of investment is 48.25; 250000*48.25= 12062500

Spot rate after 6 month is 45.46; 2875500*45.46 = 13069750

Profit in spot: 13069750 - 12062500 = 1007250

Sell position in Future at 48.65: 287500*48.65 = 13986875

Squared off at 45.95: 287500*45.95 = 13210625

Profit in future: 13986875-13210625 = 776250

Total profit: 1007250 + 776250 = Rs 1783500