Friends, Updating here the recollected questions from Dec 2017 Exams. Wish you all the very best for your exam.
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A forward purchase contract for USD 500,000.00 booked 2 months back at 49.2500 is due for delivery 2 days later (spot date). The customer is informed by the drawee of the bill that the payment will be delayed by one month.
Given that the interbank spot is 47.5675/5775 and one month forward premium is 09/10 paise, and margin on TT buying and TT selling would be 0.15%, calculate rate for cancellation of the existing contract and also give indicative rate for re-booking of one month fixed date or option contract beginning one month from spot date.
Also, calculate the amount to be debited/credited to the customer's account on spot date, upon cancellation of the contract.
Answer
(a) The existing forward contract would have been booked at TT buying rate, and hence it has to be cancelled at opposite TT selling rate, computed as under;
Interbank USD/INR spot (higher of the two) -
Add Margin 0.15% - 0.0714
47.5775 + 0.0714 = 47.6489
The contract would be cancelled at = 47.65 (Round 47.6489)
Rupee amount at contracted rate USD 500,000 @ 49.2500 = Rs 2,46,25,000
Less amount at cancellation rate USD 500,000 @ 47.6500 = Rs 2,38,25,000
Amount due to the customer (to be paid to his account on spot date) - Rs 8,00,000
(b) Indicative rate for contract proposed to be re-booked;
If the contract is booked with option of one month beginning spot date;
Interbank rate - 47.5675
Less: Margin 0.15% - 0.0714
47.5675 - 0.0714 = 47.4950 (Round 47.4961)
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FV=1000
Coupon rate =10%
Term to maturity =4 yrs
interest rate =16%
Calculate
1.McCulay duration yearly
2. mculay duration semi annually
3. Modified duration yearly
4. Modified duration if term to maturity is 3 yrs
5. What is modified duration .. choose the correct one.. options were given
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A company has 4 businesses
Business A
Business B
Business C
Business D
Net cash flow was given for 5 years of each business..
1. Which business has highest mean
2. Which buisness has lowest mean
3. Standard deviation of which business is highest
4. Standard deviation of which business is lowest
5. Statements were given ..(e.g. profit of buisness A and C is decreasing with years . 2nd statement Profit of business B and D is increasing with years ) had to choose the correct statement
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4 exposures were given
Having certain value .. with tenure of exposure .. collateral security type and value were given with tenure ..
1st exposure .. exposure value 200 cr for 3 years
Collateral security A+ corporate bond.. hair cut was given
2nd exposure ..exposure value 100 cr
Collateral security FD in bank
3rd exposure security guaranteed by state govt.
4th exposure ..10 mn $ with rate was given
Had to find
1. RWA of exposure 1
2. RWA of exposure 2
3. RWA of exposure 3
4. RWA of exposure 4
5. Capital required as per basel3 including CCB
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Balance sheet of a company was given
Had to find
1. If 2% Advance becomes NPA then what's the percentage of NPA of deposit
2. Credit deposit ratio
3. CASA
4. what is CASA
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Is there nomination facility in NRE account ? With whom ?
What can be credited in NRE account
If USD = INR 62.34/36 1 month premium 66/67 .. which is at premium ?
One company has come to ABC bank for opening LC for IMPORT of something.. exporter name was given.. exporter' s bank name was given ..confirming bank name was given
5 questions on this.. what's the resposibility of confirming bank.. if importer's bank goes to liquidity .. conforMing bank will pay or not ? etc.
5 questions on FBP.. Foreign bill was purchaSed.. customer says to cancel the bill..and repurchase the bill on that date .. at what rate will u cancel the bill.. what rate will u apply for repurchase.. what amount will be credited/debited on cancellation
How much amount an AD can give for pvt. Visit abroad..
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Case Study on Macauley/Modified duration
Assume a bond has a three-year maturity, pays a 10% coupon, and that interest rates are 5%.
Find Macauley duration and Modified duration.
This bond, following the basic bond pricing formula would have a market price of:
100 / (1.05) + 100 / (1.05)^2 + 1,100 / (1.05)^3 = 95.24 + 90.70 + 950.22 = 1,136.16
Next, using the Macauley duration formula the duration is calculated as:
Macauley duration = (95.24 * 1 / 1,136.16) + (90.70 * 2 / 1,136.16) + (950.22 * 3 / 1,136.16) = 2.753
This result shows that it takes 2.753 years to recoup the true cost of the bond. With this number, it is now possible to calculate the modified duration.
To find the modified duration, all an investor needs to do is take the Macauley duration and divide it by 1 + (yield-to-maturity / number of coupon periods per year). In this example that calculation would be:
Modified duration = 2.753 / (1.05 / 1) = 2.621
This shows that for every 1% movement in interest rates, the bond in this example would inversely move in price by 2.621%.
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