Part Two: Descriptive part. Answer 3 questions of 3 marks each.

1. The current spot rate of Singapore dollar against US dollar is $.79. Epsilon Bank speculates
that in 60 days’ time the Singapore dollar may move to either $.75 or $.83 from the current
rate. The bank has the choices to borrow both from USA as well as Singapore of US $10
million or equivalent. Evaluate the 4 strategies, (i.e., borrowing from USA and from
Singapore under the two speculations) and identify the best speculative strategy, if any
taking the following information in consideration.
Currency   Lending Rate   Borrowing Rate
U.S. Dollar   7.0%   8%
Singapore Dollar   3.0%   5.0%

2. How does this create the problem of risk belongingness of a pharmaceutical firm that is
going to introduce agricultural production of herbal medicine?
Closing
Closing Share Price Closing share price agro
Day DGEN
pharmaceutical business
Values
1-Jan 1289 14.8 310
1-Feb 1513 16.3 430
1-Mar 1710 18.5 530
2-Apr 1877 22.3 612

3. Give an account of strengths and weakness of the latest balance of payments of Bangladesh.
4. From the following data find out the present value of cash flow as on 2023 of a US MNC of
12% cost of equity having operations in Bangladesh and UK. Note that repatriation from
investment does not take place annually. Repatriations from UK take place once in every 2
years and repatriations from Bangladesh take place in every 3 years. Money not repatriated
is kept annually in local bank at the quoted interests.
Year 2024 2025 2026 2027 2028 2029
Cash flow from USA (m $) 2,000 2,100 2,500 3,000 3,000 4,000
Cash flow from UK (m £) 1,000 1,500 1,700 1,300 1,700 2,000
Cash flow from Dhaka (b Tk) 200 300 350 400 460 500
Pound rate in US $ 1.3 1.5 1.6 1.7 1.6 1.5
US dollar rate in Taka 107 105 100 102 110 115
Interest rate in UK 5% 6% 7% 5% 4% 3.00%
Interest rate in Dhaka 10% 9% 8% 7% 8% 9%