Corporate Fin Mgt NDLM.PDF

(1) UC Corporation of the USA invests in India Rs.3, 60,000 to modernize its

Indian subsidiary.

(2) A tourist from Egypt buys souvenirs worth Rs.3, 600 to carry with him. He

also pays hotel and travel bills of Rs.6, 000 to Delhi Tourist Agency.

(3) The Indian subsidiary of UC Corporation remits, as usual, Rs.6, 000 as

dividends to its parent company in the USA.

(4) This Indian subsidiary of UC Corporation sells a part of its production in other

Asian countries for Rs.1, 20,000.

(5) The Indian subsidiary borrows a sum of Rs.3, 20,000 (to be paid back in a

year’s time) from the German money market to resolve its urgent liquidity

problem.

(6) An Indian company buys a machine for Rs.1, 30,000 from Japan and 50

percent payment is made immediately; the remaining amount is to be paid

after 2 years.

(7) An Indian subsidiary of French Company borrows Rs.60, 000 from the Indian

public to invest in its modernization programme.

Problem 2:

Convert the following rates into outright rates and indicate their spreads:

Spot 1 - month 3 - months 6 - months

Rs/$ 38, 6800/15 10/15 15/20 20/30

Rs/$ 53, 2400/20 30/20 40/30 45/32

Rs/DM 22, 8000/25 20/15 30/50 35/55

Work out the Bid Price, Ask Price and Spread Price in Indian rupees with reference to a)
Rupee rate of Dollar b) Rupee rate of Pound sterling, c) Rupee rate of Deutschmark..

Problem 3:

Given the following data:

Spot rate: Rs.45.0640 = $ 1

6 - months forward rate: Rs.45.8490 = $ 1

Annualized interest rate on 6-months rupee: 10%

Annualized interest rate on 6-months dollar: 5%

Work out the arbitrage possibilities.