1. Why have considered rate of 51.3625 for calculating US $? (Case study 1)
Question : ABN-Amro Bank, Amsterdam, wants to purchase `15 million against
US$ for funding their Vostro account with Canara Bank, New Delhi.
Assuming the inter-bank, rates of US$ is `51.3625/3700, what
would be the rate Canara Bank would quote to ABN-Amro Bank?
Further, if the deal is struck, the equivalent US$ amount would be.
Answer : US$ 2,92,042
2. Shouldn’t we accelerate the payment in soft currency instead as they have more risk of FX fluctuation and delay payments in hard currency which are relatively stable? (Case study 2)
Question : Technique involving acceleration of payments of hard currency and delaying payments of soft currency payables to hedge forex exposure is
Answer : leading and lagging
3. How have we calculated the initial investment layout when payback period in 2 years? Kindly explain the calculation. (Case study 3)
Question : A project has a cost of capital of 10% and a payback period of 2 years with annual cash inflows commencing from year end 2 to 4 of Rs. 60 crore. The initial investment outlay at the beginning of year 1 shall be
Answer : Rs. 67.80 crore
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