NMIMS INTERNATIONAL BANKING & FOREIGN EXCHANGE MANAGEMENT ASSIGNMENT DEC 2021

INTERNATIONAL BANKING & FOREIGN EXCHANGE MANAGEMENT 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 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 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 &bull Issuing Bank &bull Beneficiary &bull Applicant &bull Beneficiary Bank 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 b. Compute the Forward premium/discount of USD/INR in the Indian Forex Market