Atmiya University

International Finance Unit – 2

Forward Premium & Discount
1. Spot 1 $ = Rs. 40.00 / 40.10
1 month forward .10 /.11
2 months forward .12/.13
3 months forward .14/.15
Calculate 1 month, 2 months and 3 months forward rates.
2 You are given the following $ quotes:
Spot Rs 40.50/40.60
2 months forward 0.10/0.20 = 40.60 – 40.80
3 months forward 0.20/0.10 = 40.30 – 40.50
4 months forward 0.25/0.30
(a) Calculate 2 months, 3 months and 4 months forward rates.
3 Spot $ 1 = Rs.40 Forward $ 1 = 44 Find (i) % premium of Dollar (ii) Discount
of Rupee.
4 You are given the following $ quotes:
Spot Rs 40.50/40.60
2 months forward 0.10/0.20
3 months forward 0.20/0.10
4 months forward 0.25/0.30
(a) Calculate 2 months, 3 months and 4 months forward rates.
(b) What amount you will pay in rupees for purchasing 5,00,000 USD?
(c) How many Dollars you will sell to get Rs.5, 00,000? (You have enough
Dollars)
(d) Calculate % of discount/premium of Dollars on 3 months and 4 months
forward rates. Assume (i) You are buying $(ii) You are selling $
5 Calculate how many rupees a New Delhi based firm will receive or pay
for its following three foreign currency transactions:
(a) Purchasing $1,00,000 on 2 months forward basis.
(B) Selling 70,000 Canadian Dollars on 3 months forward basis.
(c) Purchasing 8,25,000 Japanese Yens on 1 month forward basis.
Spot 1 Month 2 Months 3 Months
Forward Forward Forward
1$ Rs. 40.00/40.10 5/6 p 11/10 p 10/11 p
1 CD Rs. 34.90/Rs.35.00 0.10/0.20 0.11/0.12 0.10/0.11
100 Yens Rs. 33.00/33.10 0.11/0.10 0.12/0.13 0.14/0.15