International Finance
Internal Assignment Applicable for June 2023
Q1. ABC Ltd- An Indian Multinational Company wants to expand its operations in
European Nations and has decided to buy a land in Poland for setting a manufacturing
unit. The setting of the manufacturing facility will open billion-dollar European Market
for the company. (10Marks)
It is only half solved
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Q2. An Indian company imported goods from US. The US manufacturer invoices the
shipment in Dollar (USD), and the amount is USD 5 million. The importer needs to pay
the amount by 30 October 2023. The data regarding the futures contract as on 10 October
2023 is:
Interbank Spot Market
USD-INR 80.2725 – 80.2775
NSE futures:
USD INR 281023 80.3175- 80.3250
Questions:
Explain the process of hedging with currency futures for the above case, if the spot rate
turns out to be INR 79.1250 on 28th October. What is the notional loss/profit of the Indian
company when compared to the actual spot rate on October 28th? (Assume that the futures
settlement rate is the same as the spot rate on the contract expiry date.)
Also, if the spot rate was 81.6250 on the expiry date, what would be the company’s
notional profit for having decided to hedge the exposure? (10 Marks)
Q3. An Indian Merchant importing goods from UK worth 1 million GBP. But there is no
direct quotation between GBP INR is available in the market. The spot rate in the market
available is
GBP USD 1.2100
INR USD 0.012
a. Calculate the exchange rate between GBP INR using the above information (5
Marks)
b. Assume that spot quotation between USD INR 80.7400- 80.8700. The six months
forward is 216.25-218.25. Calculate the six months forward bid and ask rate for
USD INR. (5 Marks)