Numerical of Spot/Forward/TOM/Overnight RATES

USD-INR 
spot and forward rate 
 USD - 65.60/62 
O/N - 1/2 
TOM - 2/3 
2 weeks - 7/8 
1 month - 15/17 
2 months - 31/33 
3 months - 47/50 
6 months - 95/100

Q1. What is the rate at which AD can buy spot dollars from market?
 a. 65.59
 b. 65.60 
 c. 65.61 
 d. 65.62

Ans: B 

Q2. 2. What is the rate at which AD may sell spot dollars in the market? 
a. 65.59 
b. 65.60 
c. 65.61 
d. 65.62 

Ans: D

Q3.AD purchases USD 100,000 in a merchant transaction and sells them in the market at 65.63 per dollar. What is the profit that AD earns in the transaction?  


Ans: Purchase Rate for AD(Now AD is customer) will be Selling RATE that is 65.62(Buying Rate) and Selling Rate will be 65.63. Hence Profit will be  USD .01 means Rs. 10000/- 

Q4.  AD sold 1 month forward USD 500,000 to a merchant and then covered up his position by buying in the market one month forward dollars at 45.82 per dollar(it is wrong in question it will be 65.82/-). What is the profit/loss in the transaction?

Ans. One Month forward selling Rate will be 65.62+.17= 65.77/- and One month buying rate according to question Rs.65.82 hence Selling Rate-buying Rate= Margin , that will be -.03. Hence loss will be of Rs. 15000/- 

Q5. What rate the AD will quote for bill buying for a bill maturing in 60 days drawn in USD?

Ans: 65.91/- 

  

Numerical on Advances against retention money- 1

A customer has approached you for finance against his retention in export contract. The export order was of $ 1 million (retention of 20%) and its turnkey project where in 25 % amount is for services. How much amount you will sanction to your customer.

 a) Max of $ 1 million
 b) Max of 0.75 million 
c) Max of 0.20 million 
d) Max of0.15 million

Solution:

EXPORT ORDER		1MN
SERVICE PORTION		25.00%
AS PER GUIDELINES NO SANCTION FOR SERVICES HENCE EXPORT ORDER FOR SANCTION		.75MN
RETENTION MONEY		20.00%
		.75 x 20% = 0.15mn
ANSWER IS

Retention Money Reference 

Yield of T- Bill -Question 2

 Question

What is the price at which a treasury bill maturing on 23rd March 2017 would be valued on July 13, 2016 at a yield of 6.82%?
a. 94.59
b. 95.49
c. 96.59
d. 97.69

Who is NRI?

As per FEMA,1999 Non- Resident means;

• Indian citizens who proceed abroad for employment 
• or carrying business
• for any other purpose in circumstances indicating indefinite period of Stay outside India
• Indian citizens working abroad on assignments with foreign governments, Government agencies or International and multinational agencies like UNO, International Monetary Fund(IMF)and world bank etc.
• Officials of Central and State government and public sector undertakings deputed abroad on assignments with foreign government agencies /organizations

Note: A person who is residing in abroad for education, working for indefinite period of stay is called Non-Resident Indian. Tourist are not categorized as NRI while students are NRI as per RBI while their stay is not indefinite.

NUMERICAL ON CIF,FOB, PACKING CREDIT -1

A customer is a need of export finance for his export order worth $2 Million. The insurance is 2% of FOB and freight $3000. How much amount you will give to customer as packing credit, if the bank margin is 15%.

A. $16,64,116
B.$17,00,000
C.$16,63,450
D. NONE

Solution

EXPORT ON CIF		2000000
INSURANCE		2% OF FOB
FREIGHT		3000
FOB=(CIF- INSURANCE-FREIGHT)
FOB=(2000000-(2% XFOB)-3000)
FOB=1957843.137
MARGIN= (15% of FOB)
PERMISSIBLE FINANCE = 1957843.137 X 85%
ANSWER	1664166.66666667

Numerical on Bills Collection -1

From the following details, what will be the closing balance for collection Account: 

On 1.4.2017, Bills for collection were - 51,00,000 
During the year 2017-18 Bills received for collection amounted to - 75,00,000 
Bill collected during the year 2017-18 - 98, 47,000
Bills dishonoured and returned during the year - 27,10,000 


a. 47,37,000
b. 3,10,000
c. 43,000 
d. 27,53,000

Solution:

Balance as on 1/4/2017, Balance Receivable		5100000
Bill Receivable in 2017-18		7500000
Bill Dishonored in 2017-18		-2710000
If All Bill Received in 2017-18 then
Balance will be		9890000
But Bill Received in 2017-18		9847000
Bill Receivable at Closing		43000

Numerical on Duration, Modified Duration, Volatility and Yield

Numerical
 
Bank has a €5m position in 3 a year zero coupon bond with face value €5,955,080. The bond is trading at an YTM of 6%. The historical mean change in daily yield is 0.00% with a standard deviation of 8 basis points (0.0008).

 a) What is the duration, and the modified duration of the bond?

 Solution: Duration of Zero Coupon Bond is maturity of period of Bond. Hence duration is 3 Year. 

Modified Duration= Duration/(1+YTM)
                              =3/(1+.06)
                              =2.83

 b) What is the maximum adverse bad daily yield change given that we do not want no more than 5% change that yield changes will be greater than this maximum?

Solution: In respect of 5% change in yield, means it can lie from +5% to -5%, taking 90% confidence interval , maximum adverse yield  change = 1.65*.0008 = .00132

 c) What is the daily earning at risk for this bond? Use modified duration.

Solution:
 
      %change in price= -(modified  duration ) X yield change
                                 = -2.83*.00132 => .0037356
                                  =50,00,000*.0037356==>>18678
 

 d) What is the 10 day VaR for this bond?

Solution:

Daily Volatility = € 18678 

for 10 Day of Volatility =  Daily Volatility  X √10 =>18678* √10 ==>59065.02