Exercise 1 AND Answer 26102020 PDF

Preview

Summary

EXERCISE 1 (26/10/2020)QUESTION 1Below are the Kuala Lumpur market quotations of spot and 3-month rate for RM/EUR and RM/JPY. Calculate the:Spot 3-month forward RM/EUR 4/60 45/ RM/JPY100 3/55 82/ i) 3-month forward outright rates for the Euro and Yen quotations. (4 marks) ii) Spot percentage bid-ask...

Description

EXERCISE 1 (26/10/2020) QUESTION 1 Below are the Kuala Lumpur market quotations of spot and 3-month rate for RM/EUR and RM/JPY. Calculate the: RM/EUR RM/JPY100 i)

Spot 4.4920/60 3.9730/55

3-month forward 45/75 82/62

3-month forward outright rates for the Euro and Yen quotations. (4 marks)

ii) Spot percentage bid-ask spread for RM/EUR and RM/JPY100.

(3 marks)

iii) Annualized bid forward percentage for RM/EUR and RM/JPY100. (4 marks) iv) The amount paid to buy JPY500,000, delivery in 3-months’ time. (2 marks) v) Spot cross rates of JPY per unit of EUR.

ANSWER Q1 i)

3-month forward RM/EUR Bid = 4.4920 + 0.0045 = RM4.4965/EUR Ask = 4.4960 + 0.0075 = RM4.5035/EUR

3-month forward RM/JPY100 Bid = 3.9730 – 0.0082 = RM3.9648/JPY100 Ask = 3.9755 – 0.0062 = RM3.9693/JPY100

ii)

RM/EUR Spot Bid-Ask spread = (Spot Ask – Spot Bid) / Spot Ask x 100 = (4.4960 – 4.4920) / 4.4960 x 100

(4 marks)

= 0.089%

RM/JPY100 Spot Bid-Ask spread = (Spot Ask – Spot Bid) / Spot Ask x 100 = (3.9755 – 3.9730) / 3.9755 x 100 = 0.063%

iii)

Annualized bid forward percentage for RM/EUR. Forward rate – Spot rate

x

Spot rate

360

x 100

Fwd contrct days

= (4.4965 - 4.4920)/ 4.4920 x

360/90

x 100

= 0.4%

Annualized bid forward percentage for RM/JPY100. Forward rate – Spot rate

x

Spot rate = (3.9648 – 3.9730)/ 3.9730 x

360

x 100

Fwd contrct days 360/90

x 100

= - 0.83%

iv)

Buy JPY500,000, Bank Sell (Ask) JPY500,000 x RM3.9693/100 = RM19,846.50

v)

Spot cross rates (common currency on many unit sides) Bid

= Bid FC/Ask HC

Ask

= Ask FC/Bid HC

= 4.4920/ (3.9755/100)

= 4.4960/ (3.9730/100)

= JPY112.99/EUR

= JPY113.16/EUR

QUESTION 2

Spot Rate 30-day forward 60-day forward Three months interest rate per annum

MYR/SGD

MYR/CAD

MYR 3.0215/70 75/65 70/80 Malaysia Canada Singapore

MYR 3.1428/62 55/45 60/70 15% 10% 20%

Calculate: ii

30-day forward outright of Canadian dollar. (2 marks)

iii

90-day forward outright of Singapore dollar. (2 marks)

iiii

amount of SGD you should pay for MYR10,000 for delivery in 3 months. (3 marks)

iiv

amount to be received in Ringgit if your importer pays SGD5,000 in one month’s time. (3 marks)

iv

amount in CAD if the customer pays MYR10,000 in 2 months’ time. (3 marks)

ivi

bid-offer price and percentage spread of Singapore dollar per Canadian dollar in 60-days. (4 marks)

ANSWER Q 2 i)

the 30-day forward outright of Ringgit in Canadian dollar. (2 marks) CAN/RM

Bid > Ask  discount (-) 30-day forward outright bid = 3.1428 – 0.0055 = RM3.1373/CAD

(1 mark)

30-day forward outright ask = 3.1462 – 0.0045 = RM3.1417/CAD (1 mark) (Total marks = 1 mark+ 1mark = 2 marks)

ii)

the 90-day forward outright of Singapore dollar in Ringgit. (2 marks) RM/SGD Int Singapore = 20% and Int Malaysia = 15% (HC -FC) Bid points = Spot bid x Interest rate differential x n/360 = 3.0215 x (0.15-0.20) x 90/360 = -0.03777 (0.5 mark) Bid outright = Spot bid – bid point = 3.0215 -0.03777 = 2.98373 @ 2.9837 (0.5 mark) (HC -FC) Ask points = Spot ask x Interest rate differential x n/360 = 3.0270 x (0.15-0.20) x 90/360 = -0.03783

(0.5 mark)

Ask outright = Spot ask – ask point = 3.0270 -0.03783 = 2.98891625 @ 2.9889

(0.5 mark) (Total marks = 2 marks)

iii)

the amount of SGD you should pay for RM10,000 for delivery in 3 months. (3 marks) You sell (ask)  bank buy (bid) RM10,000 ÷ RM2.9837/SGD = SGD 3,351.54 (3 marks)

iv)

the amount to be received in Ringgit if your importer pays SGD5,000 in one month’s time. (3 marks) Exporter  bid, Therefore, bid 1 month: B>A  discount (-) Bid outright

= Spot bid – bid point = 3.0215 – 0.0075 = 3.0140

(1 mark)

SGD5,000 x RM3.0140/SGD = RM15,070

(2 marks)

(Total marks = 1 mark+ 2marks = 3 marks) v)

the amount in CAD if the customer pays MYR10,000 in 2 months’ time. (3 marks) Customer buys CAD, Bank sell (ask) Therefore, ask 2 months: B...