M.Com. DEGREE EXAMINATION, APRIL 2016
Third Semester
Commerce
PRINCIPLES OF FOREX MANAGEMENT
(2012 onwards)
Time 3 Hours Maximum 75 Marks
Section A 3 15)
Answer all the questions.
All questions carry equal marks.
1. State the meaning of Direct and Indirect quotations.
2. What is technical analysis in Forex Market?
3. Write note on "LORO".
4. What is "Translation Risk"?
5. State the need for FEMA 2000.
Section B 10 50)
Answer all the questions, choosing either or
All questions carry equal marks.
6. Who are the participants in a foreign exchange
market? What is the role of exchange brokers in the
present-day online trading?
Or
Describe the various foreign exchange markets.
Sub. Code
611506
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7. The floating rates of exchange truly reveal the
purchasing power parties of currencies in terms of
each other. Discuss.
Or
Explain the mechanism of fixed exchange rates.
8. Describe the features of Floating Rates systems.
Or
Explain the need and forms of exchange control
measures.
9. Forward contract on palladium are available in New
York. Each contract is for 100 ounces of the metal,
deliverable after six months. The current spot price
is 300 per ounce and storage costs are 5 per
ounce per month, payable at the end of the contract.
The riskless rate of interest is per annum.
What should be the no-arbitrage forward
price?
If the forward price is 350 per ounce, how
can one exploit the arbitrage opportunity?
If the forward price is 330 per ounce, how
can one exploit the arbitrage opportunity?
Or
You, as a foreign exchange dealer of your bank, are
informed that your bank has sold a T.T. on
Copenhagen for Danish Kroner 10,00,000 at the
rate of Danish Kroner 1 Rs. 6.5150. You are
required to cover the transaction through London or
New York whichever course offers you a more
profitable rate. The rates on that date are as under
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Mumbai London Rs.74.3000 74.3200
Mumbai New York Rs.49.2500 49.2625
London Copenhagen DKK 11.4200 11.4350
New York Copenhagen DKK 7.5670 7.5840
Will you cover the transaction through London or
New York and what will be the exchange profit on
the transaction? Ignore brokerage at all centers.
10. Explain the provisions relating to export of goods
and services under FEMA 2000.
Or
Explain the trend, composition of foreign exchange
reserves of India.
Section C 10 10)
Compulsory questions.
11. Your exporter-customer has requested you to book a fixed
date TT forward contract for Swiss Francs 5,00,000 in
respect of an export bill due for payment 180 days from
the date of the contract. Assuming .you cover yourself by
sale of Swiss France in London market for the
corresponding delivery date when the exchange rates for
Swiss Francs were as under
Spot USD 1 CHF 1.6120/6165
One month 90/58
Three months 165/160
Six months 330/320
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And US dollars are quoted in the local inter bank market
as under
Spot USD 1 Rs.48.4025/4175
One month 48.6550/6725
Three months 48.8550/8750
Six months 49.2550/2800
Calculate the exchange rate and the rupee amount
payable to the customer bearing in mind the following
An exchange margin of 0.08% is required.
Rupee equivalent to be nearest to the whole rupee.