ASSIGNMENT 03

Department of Business administration

Address: Plot No-A/2, Main Road, Jahurul Islam
City, Aftabnagar, Dhaka-1212
Phone: 09666775577 Mobile: 01755587224
www.ewubd.edu

Submitted to:
Dr. Toufic Ahmad Choudhury
Director General
Bangladesh Institute of Bank Management

Submitted by:
Shaoli Mofazzal
ID: 2019-2-95-030
Master of Business Administration (MBA)
East West University

Course Information:
Course Code: FIN 424
Section: 01

Date of Submission: January 02, 2021

QUESTION 1
টাকার মান রাখতে ডলার কিনেই চলেছে কেন্দ্রীয় ব্যাংক

Bangladesh uses floating exchange rate, that means exchange rate of a currency depends on the
demand and supply of that currency. In this COVID-19 pandemic Bangladesh has received huge
amount of foreign remittance that comes under the secondary account of Balance of Payment
(BOP), so there is a surplus of dollar in the market than ever before, with this surplus it indicates
that supply of Dollar has increased. For stabilizing the market central bank buy those excess
amounts of dollar in order to create the demand for dollar, otherwise Dollar will depreciate
because of the surplus, on the other hand Taka will appreciate at first, for this foreign export will
decreased and at the end taka will be depreciated. So central bank constantly buying Dollar so
that Dollar won’t depreciate in our country because it has adverse effect on the local currency as
taka will depreciated. Because of central bank is buying Dollar continuously, it also adds positive
figure in our BOP and increases the reserve amount. There is also a reason that is other banks has
a limit of foreign currency that can be kept by them, here central bank also helps them to get rid
of the excess amount through buying dollar from them. When the market is in deficit of Dollar
then central sell those Dollar for that reason market become stable.
QUESTION 2

(A)

Question No-20 (speculation)

Let,
The peso will depreciate in 10 days, for that reason the bank will borrow peso, change amount in
US $ and invest it over 10 days, and change back to peso the amount needed to cover the loan.

1. Loan in Peso:
Borrow 70,000,000 peso @ 8.7% Pa

2. Change the amount in US $ by using spot rate ($ 0.15: 1 Peso)

70,000,000 MXN * $ 0.15 = $10,500,000

3. Invest in US $ amount over 10 days:

US $ lending rate is 8% for one year or 8%*10/360 = 0.22% for 10 days
$10,500,000 * (1+.0022) = $ 10523100

4. After 10 days, the peso loan interest rate is 8.7%

8.5 %∗1 0
So, loan amount will be = 70,000,000 {1+( )} = 70169167 peso
360
The bank will use (70169167* $ 0.14) = $ 9823683

5. Now, Potential Profit = $ 10523100 - $ 9823683 = $699417

(B)

1. Loan in US $: $10,000,000 @ 8.3% pa

2. change the amount in peso using the spot rate $ 10,000,000 / 0.15 = 66666667

3. Invest the peso amount over 30 days:

Peso lending rate is 8.5% pa or 8.5%*30/360 = 0.70 %for 30 days
8.5 %∗30 .085∗30
66666667 * {1+( )} =66666667 * {1+( )} = 67138889 peso
360 360
67138889*0.17= 11413611

8.5 %∗30
4. After 30 days, the US $ loan is $ 10000000 * {1+( )} = $10069167
360
5. Profit= $11413611- $10069167 = $1344444