BWBB 3073 TREASURY MANAGEMENT GROUP A

SECOND SEMESTER SESSION 2019/2020 (A192)

Individual Assignment

UNDERSTANDING FX RATES

Submitted to:
En. Shahril Bin Shafie

NO MATRIC NO NAME
1 259037 Pavitra A/P Nadaraja

Submission Date
11/7/2020
Understanding FX Rates

Answer all questions.

1. When a bank decided to sell SGD/USD for 1 million at 1.5500, it means (2 marks)

i. The bank is buying USD 1,000,000

ii. The bank is selling SGD 1,550,000

2. You are one of the Treasury Dealer at UUM Bank. You can call USM Bank for a
SGD/USD quote. USM Bank responded and says “1.50 80/100”. (10 marks)

i. At what rate can you buy SGD?

1.5100

ii. At what rate can you buy USD?

1.5080

iii. At what rate can you sell SGD?

1.5080

iv. At what rate can you sell USD?

1.5100

v. At what rate does USM Bank buys USD?

1.5080

vi. At what rate does USM Bank buys SGD?

1.5080

vii. At what rate does USM Bank sells USD?

1.5100

viii. At what rate does USM Bank sells SGD?

1.5100

ix. What is the difference in rates if your bank were to buy USD at USM Bank’s
rate and if the USD is obtained at your bank’s own rate?
20 pips

x. What is the difference if USM Bank were to obtain SGD from your bank
compared with if it were to bid SGD at its own rates?
20pips
3. Settlement of international trade between an importer and an exporter can take
place in either THREE (3) situations, i.e., (i) using the home currency of the
importer; or (ii) using the home currency of the exporter; or (iii) using a third
country currency. In each of the scenario below, briefly describe how the
respective parties are affected by filling up the spaces below. (6 marks)

If both parties agreed for payment Malaysian Seller need to Japanese Buyer need
to be made using… … to…
Importer’s home currency Convert MYR to JPY Accept JPY

Exporter’s home currency Accept MYR Convert JPY to MYR

Neutral currency, say, USD Sell MYR to buy USD Sell JPY to buy USD

4. Interpret the meaning of the quotation USD/EUR 1.2490 / 00 (1 mark)

Quoting party buys USD at EUR 1.2490 and sells USD at EUR 1.2500,
Calling party sells USD at EUR 1.2490 and buys USD at EUR 1.2500.

5. Interpret the meaning of the quotation EUR/USD 1.2490 / 00 (1 mark)

Quoting party buys EUR at USD 1.2490 and sells EUR at USD 1.2500,
Calling party sells EUR at USD 1.2490 and buys EUR at USD 1.2500.