BFM CASE STUDY ON EXCHANGE RATES | PART – 3
Important Set of BFM Case StudY for CAIIB Exams 2022 | Preparation material for CAIIB Nov Exam 2022 with Case Studies.
This article is the 3rd installment of BFM Case Studies written for those CAIIB candidates who want to sharpen their CAIIB Exam preparation & desire to clear the November CAIIB BFM Exams 2022 in first attempt.
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In this post, you are going to find the case studies i.e. BFM Case study 5 & 6 on the concept of Exchange Rate from the applicable CAIIB BFM syllabus for 2022 Exams. But you start solving the case studies, we would like to highlight the fact that we also have the latest BFM Study Material 2022 for candidates to help them clear CAIIB in their first attempt.
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BFM CASE STUDIES FOR CAIIB EXAM 2022
BFM CASE STUDY 5:
On 10th of January 2012, ‘Rich’ bank’s Mumbai branch entered into following transactions of foreign currency sale and purchase:
- With Mr. Aman for sale of USD 2,000.00 to be delivered on the 10th of January.
- With Mr. Bansal for purchase of USD 2,000.00 to be delivered on 11th of January.
- With Mr. Canada for purchase of USD 2,000.00to be delivered on 14th of January. (12th & 13th January – bank holidays)
- With Mr. Doctor for sale of USD 2,000.00to be delivered on 11th of February.
The other date in relation to transactions is as follows:
The inter-bank foreign currency rates on 10th of January 2012 are as under:
Cash rate = USD = Rs. 45.50/60,
Tom rate = USD = Rs. 45.55/65,
Spot rate = USD = Rs. 45.60/70 and
1 month forward rate = USD = Rs. 45.80185.
On the basis of given data you are required to answer:
Q-01: Which of the below rate will be used to transact with Mr. Aman and what will be the amount (in INR) that will be involved?
- Rs. 45.50, Rs. 91,000.00
- Rs. 45.55, Rs. 91,100.00
- Rs. 45.60, Rs. 91,200.00
- Rs. 45.85, Rs. 91,700.00
Q-02: Which of the below rate will be used to transact with Mr. Bansal and what will be the amount (in INR) that will be involved?
- Rs. 45.50, Rs. 91,000.00
- Rs. 45.55, Rs. 91,100.00
- Rs. 45.60, Rs. 91,200.00
- Rs. 45.85, Rs. 91,700.00
Q-03: Which of the below rate will be used to transact with Mr. Canada and what will be the amount (in INR) that will be involved?
- Rs. 45.50, Rs. 91,000.00
- Rs. 45.55, Rs. 91,100.00
- Rs. 45.60, Rs. 91,200.00
- Rs. 45.85, Rs. 91,700.00
Q-04: Which of the below rate will be used to transact with Mr. Doctor and what will be the amount (in INR) that will be involved?
- Rs. 45.50, Rs. 91,000.00
- Rs. 45.55, Rs. 91,100.00
- Rs. 45.60, Rs. 91,200.00
- Rs. 45.85, Rs. 91,700.00
Answers of BFM Case study 5:
1-III
2-II
3-III
4-IV
Explanation of Answers of BFM Case study 5:
- The rate that will be used to transact with Mr. Aman and the amount (in INR) that will be involved will be calculated in the following way:
Because it is a sale transaction, the same day rate will be applicable i.e. Cash rate = Rs. 45.60.
The amount = Rs. 45.60 x 2,000.00 = Rs. 91,200.00
- The rate that will be used to transact with Mr. Bansal and the amount (in INR) that will be involved will be calculated in the following way:
Because it is a purchase transaction, the next day rate will be applicable i.e. TOM Rate = Rs. 45.55.
The amount = Rs. 45.55 x 2,000.00 = Rs. 91,100.00
- The rate that will be used to transact with Mr. Canada and the amount (in INR) that will be involved will be calculated in the following way:
Because it is a purchase transaction, the spot day rate will be applicable = Rs. 45.60. The holiday’s period will be excluded while calculating.
The amount = Rs. 45.60 x 2,000.00 = Rs. 91,200.00
- The rate that will be used to transact with Mr. Doctor and the amount (in INR) that will be involved will be calculated in the following way:
Because it is a forward sale transaction, the forward sale rate will be applicable = Rs. 45.85.
The amount = Rs. 45.85 x 2,000.00 = Rs. 91,700.00
Read Also: CAIIB BFM CASE STUDY ON EXCHANGE RATE PART-1
BFM CASE STUDY 6:
On 15th of April 2015, ZAIN Ltd expects to receive USD 20,000.00 within July 2015. ZAIN ltd wants to book a forward contract for July 2015.
GIVEN: The USD/1NR inter-bank rates are as follows:
Spot rate = Rs.45.10/20.
The forward premium = 18/20 paise for May,
The forward premium = 31/33 for June
The forward premium = 45/47 for July.
The margin to be retained by the bank = 0.10 paise per USD.
Q-01: What will be the FC rate at which the forward contract will be booked in case the margin is not considered?
- Rs.45.31
- Rs45.41
- Rs.45.55
- Rs.45.57
Q-02: What will be the FC rate at which the forward contract will be booked in case the margin is considered?
- Rs.45.31
- Rs45.41
- Rs.45.55
- Rs.45.57
Answers of BFM Case study 6:
1-II
2-I
Explanations of Answers of BFM Case study 6:
- The FC rate at which the forward contract will be booked in case the margin is not considered will be calculated:
Bank will consider the forward premium for June because amount can be received on any day in July including 1st of July. Therefore, the premium amount is 31 paise.
The rate would be:
Spot rate = Rs. 45.10
Add: Forward premium for June = Rs. 00.31
The FC rate = Rs. 45.41
- The FC rate at which the forward contract will be booked in case the margin is considered will be calculated:
For calculating the forward rate, the bank will consider the forward premium for June as amount can be received on any day in July including 1st of July. Thus, the premium amount = 31 paise.
The rate would be:
Spot rate = Rs. 45.10
Add: Forward premium for Jun = Rs. 00.31
Rate = Rs. 45.41
Less Margin = Rs. 00.10
The quoted FC Rate = Rs. 45.31
You can also find the BFM case studies Part-1 & Part-2 on exchange rate (covers BFM Case Study 1, 2, 3 & 4) by visiting our official site. Practice this one & solve it by hand instead of just going through it & if you liked our series of BFM case studies, then tell us in the comments & if you further want the next set of case studies on any topic then you can also comment that! We will certainly consider it.
Till then, all the best for your CAIIB Exams 2022!
Read Also: CAIIB BFM CASE STUDY ON EXCHANGE RATE PART-2
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