Risk

Foreign Currency Management

Exam
Significance
March 2023 9 Masks. -

=
Sept 2022 6 Masks. v
Aug
March 3022 9 Masks -

·
FcRm

· Int. Rate RM -

Translation Rules

2,000 U115.

Buyas (Pakistan).
US A

⑦ USD
W Y

Deales. Rs: 260 -

265/USD
BR SR

2000
v/x Rs.265:
x
(R1:530,000
US D

Deals Sold USD, to US.

FC
payment
↳ I will
by USD

↳ Deals will
Sell USD
↳ S

SR T B.R.

Payment in FC 7 SR.

(higher Rate)

⑰
ACCA Fee 4000 USD OR 2400 4BP
I

Rate R:280-285 /VSD

Spot
R:370-375/USD.
Pick He best option.
 4000 USD

4000 x205 1,140,000

=

2,400 GBP

2400x375,900,000 v

Receiptin F.C.

our C.
(Erposters) 5000 USD US.
Imposters)

Spot 2*-28gluss.
Deale.

FC Receipts -> BR.

5,000 w/D R:
x
284/us
R:1,720,000
FC Receipt.
Is sell to
7
Deales.

7 FC
Buy
Real B. R.

BR <SR.
smalle
FC
Receipts -> B.R.

Summary
EC EC
Day ->
Buy -> DelleSell SR.

Ecipt -> FCsel-DealBy BR.

 - -

is
Pay of 60,500 USD
Re:
60,500 210
USD x 12,705,000

27 Receipts20,470 GBP

R:6,243,350
20,470 305:
x

37 Paymentof 25,000 GBP

25,0004BP 316:
x R:7,900,000

4) Receipt of 40,500 Yen

40,500 yen 0.88
x R=35,692.8
=

EC SR.
Payment pick

FC ReceiptsPick BR.
 Cover
Forward
Los F.C.

I I

I Jan Imasch.

- 7500 USD. Fee.

Spot.1:260-265/USD -

End R0:275-250/USD

Aty 7,500 USD

S.D I Masch.
Rate. 200
R:
PKR:7500x200:2,100,000

Spot= bia?"326 /Issa

(Masch)

Spot 255-260/UsD x

(March)

E
UK Bangladeshi
Curtomnes
supplies
ARM
Co
↑

BDT.
1,200,000
70,0009BP

To
·

day IJan
·Osces
·

Receiptsof
placed
today
Goods IFeb
IJan

(Paid Supplies

Stay life of Stock (Month

Sold March.
Goods on

·Got BDT on 1
Apsil.

PKR IGBP P1R/B$T

Spot 280-205 40-43
1 month Fund 286-291 44 -
46
2 291 296 46 48
MonH Fud
-
-

Food 299-305 49 51
3
Mouth -

Calculate
psojit
net
 Is impoit
N

an
Feb ·Masch
Stelt
Oddes Stock
Life. BUT to
Placed Received be received.
sell
Y good.
1,200,000 BD T.
payment to
be made 3 Mont Food.

70,000 GBPs
1 Month Fud

Payment(70,000 4BP, 291) x 20,370,000

Receipts (1,200,000 B17x49) 58,000,000

Profit misation 38,230,000

I

->

Now Month 2 Month 3 mouth.

A D I

Masch
2022 1Apsil
imay 1June
&MowH

Oddes -Goods Receipt ·Payment

to UI
Receiptsof
Date. BDT
placed Supplies. 7

~Good Sold
Out 2 Mouit's

⑲
IC ICayment Ec Receip
2 month Fud 3 Mouth End
-Ver Cover
Payment(450004BP x 322) (14,490,000)

Receipts (4,000,000 4P7 x 3.62) 14,480,000

Net low on all (10,000)
transaction.
 u

v v

-
-

I Jan IFeb Imasch 1 Apsil

11 I I

Today Proceed
PD
W

Coodes) Goods. cash

from
A.
6Pay pay

25% local Sale

40,000 kg 10,000
kg
75%
Emposto
30,000 kg

Payments
A
9
Today 40,000kg*; Imax d
15 an 200,000 Ringgit
40%
60% 120,000
=
&0,00 Ringt
IFeb (Pay) IM-ch(Pag)
1 month Fw 2 Muth Fud.

Paymentin PKR
As
Isinstalment120,000
Ringgit 67 8,040,000
x =

2nd instalmet 90,000 Ringgit 70:5,600,000

x

Pay for
Total good imposted 13,640,000
=>
 Procening Cost
40,000kg 120:4,800,000
x

Sale Procoach.

(9) Local Carency

10,000kg x 700 7,000,000
=

(b) Esom S. Asab

9SR: 270,000
30,000kg x SR.

Food Cover
for (1Apsill
3 months

Rate
B.R:R:&6/SR.

Sak Poozed 270,000

=
SRx86

R.& 3,220,000

Total Sam Collection R:30,220,000

=

(PaK SARL
+

Profit Con
& Account

Sal 30,220,000
Pusch. Cost
(13,640,000)
processing
good
cat

Net
Profit
 "Close out"
of Fosward contact

IC
Payment USD
5,000
15 am 2022
Today
pay
31 March. 2022

I
0
-

Spot Re:260-265/USD
=

3M Food:Re:275-280 USD
-
SR.

PKR:5,000 280:R. 1,400,000

Pay in x

3 Masch BR.

↳ Spot 270-275/USD.

5,000 USD x 270 1,350,000

=

Net lon
22s:
Sale 1,350,000
Cost (1,400,000)
10s. (56,000)
Oll
1 Jan 2023

6,000 USD be
agreed to

purchased on 31 Masch Fund Rate

Under End Contact Rs:250-255/usD

31m asch
Closed outthe Contract (Fwd)
at31 Masch.

SpotR: 970-2751vD
Solution

Pusch. Cost (6,000 255) x

(1,530,000)
sale 16,000 270) x 1,620,000

Profit on Clou
but
90,000
-
 Close out
of FC ReceiptContact
8,000 USD >To be deceived in 3 month.

Today date
1 Jan 2022

Receipt 31
March 2022

0
-

Spot 255-260/USD
3M Furd 262-264/USD
Emp, receipts in
PKR.8000 x262-

12,096,000 -

3: Masch

Spot280-285/USD

Open MK1
~
8,000 USD 285:2,280,000
x

Net
Progit /(loss)
sak. (to deals) 2096,000
I

Pusch. (from deals) (2280,000)

loss on
118,000)
Close out

Ed Close out

Payment at SR at BR.

Receipts. at BR. at SR.

Oll
Mpsil 2023

Expected Receipt 40,000 SAR.

Emp. Receipt date 30 June

~
Sold U/End Contract Rs.82-86/SAR.
 30Jons

End Closed on at
Spot R:76.5-78 /uss.
Solution

Sam (40,000 &2)

SARx 3280,000
S

pusch. (40,000 70) x

(3,120,000)
profit 160,000
Interent Rate

Pakistan 20%
=

USA - 4%

159n2022 Re:50/USD

A B

10,000 USD 10,000 USD

Re:
10,000 USDX 50: 500,000 10,000 USD

Deposited in US Bank.

Deposited in PK bank.

10,000 (1 4):10,400
+ USD

500,000 x (1+ 20%)

600,000
=

10,400 -

10,000 1400
= USD

R:50/USD

600,000 =50: 12000

12000 -

10,000. 2000
US D.

R:50/USD Rs:57.6923

15 an 2022 31 Dec 2022

Intesantsate
parity Iteosy
(1t i)
End Rate:L
F(1 i) +
↳!
157.6923
 600,005:57.6923
-

10,400 USD
10400 USD
I

PKR
SPOR:
ints:20%
50
USD iuts:4%

↳50x(1(1+20):(57.6923
+

4%) 1x

Oll
(R: /4BP) R.305
Spot
today
find sussency in
safe

3months' time
6 time
-

Months
I time
years
n

interent sate PKR 16%=

4BP:6% v

(H)
3month Rate. x3/12
x 16x 3/12)
+

Re
GBP 3054:1312.5
·

6 Months Rate.

305x(1+16%.x6112) I
319.81
=

1
(1+6%.
x
x61)

14 lates

305 "?:1343.77
Money Masket
Hedge.
Today IJan 2022

3months lates
payment:6,000 USD. -

spot R:260-255/USD
R:
3MONM End
272-277/USK
PKR 10%
=

UCD:4

265 =12601935-
Fwd:
Rate

5940.6 6000
1

Local Bank
Foreign Bank.
(MC B Bank).
[Std(hsta)

is Deposite
Amountin IC

6,000 USD
5,940.6 USD
(1+y,, x3112)

PKR
today buy
27 Amout to 5940.6 USD

5,940.6USD x 265

Rs:1,574,257

loan local
37
from bank
busch.
to EC

Loan Amout 1574.257

ints. 10%3/12 39,356
Total
Pay 1,613,613 6,000
=

agta month.
3

1268.936
Foreign Cursency payments

FC
Receipts- Hedging through MMH

2022
Today
1 Jan

ReceiptsExpected 5000 USD

Date
of Receipts
31
March 2022

Spot R:250 -
204 /USD
BR

PKR Ints. Rate 10% =

USD Ints. Rate:4%

Solution

FC Bank. local Bank.

Cussery
Sc. Bank. M.C. B.

FC loan

5000 USD:(1+4%. x 3112)

4,950.5 USD v

Convertinto LC

4950.5 USD 200

x 990ioo-
=

Deposite
in LC. Bank.

Deposit 990, 100

3months late 990,100x(1+ 107.x3112)
 Total Amount in
1,014,851 5000
I
=
PICR

22.97

Rate
Ints. (H 10%. x3 e
Pasity:200
I(1 4%. 3(12)
+ x

1202.97
Pay -> F) deposit -> local Cussery
loan

.
Summary Ecloam > local cassery
Receipts Deposite.

~
Receipts:
W

with
~
option
highes cash.

Ford Contact

50,000 USD 177.555

x

R. 8,877,750

Money Masket
Hedge.
Ec loan 50,000 (1+2.75%x
+
3/12)

49,650.60 USD

Convest into :49,650.60VSD x 176.65

PKR & BR
Re:8,871,500

Deposit in Local,8,871508
Bank
x (H6.75%.x (12)
19021215,
No
Hedging
50,000 USD 178.15
x

(8907,500
=

Hedging of net
position
Net position is
possible if
-

Pay & Receipts are

of
same date.

Receiptsasof
Cussencein
-Days
same

Ol Receipts (500), 4
pay
a in 3
Expected A

MonlEs
0

Payments 500 USD ARI PR

700
Receipts 700 USDY

Rs.250-255/USD
Spot
today BR
Intest Rates

PKR
Deposite
942
Bossowing
16%
USD 3% 6%v

Solution

(500) 700:200
+ USD Receipt

Hedging of 200 USD Receipt

EC loan:200:(164 x 3(12)
197. OYY USD

local
Custency:197.044US$ 250
x

Re:49,261

Ind. into:49,261 x (1+9%.x 3/12)

150,369
 -

w -

v v

15 Masch 15June

Payments -
(223,500)
Receipts 98.500 77,000

92500t (14,500t

Find Contract
15 Moch 15 Jone

FC Amout 98,500 t (146,500)

Rate
-.
x 123.62

PKR.
12,76570

Money Masket
budge
15
Masch Receipt98,500t
FC 98,500 +(1+5x.x3(12)
Bossowing
97,283.95t
Convestinto PKR
a BR 97,283.95x124.22
:

PKR:1,2084,612

Including:12084,612x (1+6.5%.x 3112

Ints
 (Rs:)
Receipts
Total (12,280,987

15
June
Payment
146,500 -
Day
FC Deposite 146,500 (1+
:
= 3%x6(12)

144,337.98 t

FC acq atR
144,334.98 fx 124.52

Rs: 17,972,591

loan
including
into 17,972,591
-
x
(1+11s. x6(12)
! 18,961,084
E

- -- - -

->
~
IX - X

--

USD GBP

Receipts. 1.5 4.00

(5.10)
Payment
1.5 (1.1)

Food Contract

Receipts:1.5 USD 87
x 130.5
=

Payment:1.19BPx136.18:149.798
Money Masket
Receipts.

I
Payments
FC Loan 1.5 (1
= +
5.2.x 3/12)
1.48075 USD FC Deposite:1.1 (1+5,.x3112)
=

1.0864 GBP
Convest into PKR.1.4875USDx
86.56
at
B.R
128. 1737 Acg. from MK+: 1.0864 PBP
using SR
x 135.13

Deposite interat 128.1737

=

(1 8.5%x3(12)
x +
Rs: 146. 81
R:130.90 v

Loan inR = 146.8 x (1+10.5%,x3(1)

R: 150.66
 Cussency False

⑰
ARM
R=200/USD
Cutere
1 Jan 2022
spot:
3 months lates ⑦
(31 March) bookles.

5,000 UID March

jutise
R:290 /USD
On 31 Mich.
v

Future
by 5000 USD 290:
x (1450,000 ~

X
Fulite see 5000 use 302:
x
1510,000 v

Gain. 60,000 v

31 March

Spot R: 302 /USD -

Spot by 5000 x 302 1,510,000

Fet gain 160,000) v

1450,000

Price Conver
e

gence.
IJan 2022
31 March 2022

Spot 250 /USD 259

Masch-futse
Futises 259
Spot (250)
Basis 9

IFeb

Spot R:280 286

Masch.
Jute
Fistisc 286
Spot (280)
6
· Masch

Spot 270
March.
Julie 273

En E
 31Msah

Masch-fulis 290
Spot 290

o
File
Spot

300 -

290 - &

280- ⑧

270-
·

260 =

250

Feb insel simsch

Spotprice indep. Poice.

Future price ->

IJam Es iMsch 3, Mich

spot 260 200 250 272

M. Futse. 266 284 252 272
6 4 2 -

basis:6 =3:2 diminish.

Oll

/pil -> Spot 295

June -
Fulise 302/vsD
available at

Bani diminish Month 1

by
will 20%
Mouth 2 35%
month 3 40%
100%
spot on May 295 =

I Jue 200
30Jh. 301
 /April 30
pi 31
May 30 June

Spot 295 295 200 301

Fatise price. 302 300.6 283.15 301

-

7 -

145.6 -
2.45 3.15 - 3.15 O

7x20%:1.4
7x35%:2.75

7x75%.:3.15

all

Spot safe
today I Feb

R:270 (USD

Moch
Jufuse available at R:277.

Spoton 28 Feb 290v

31 Mich. 2004
spot on

Basis will diminish at

a constantdate
(i.e straight line)

Required: -

28Feb
Predictfuture on
dates &

31msch

Solution
IFeb 28 Fes 3. Mich

Spot 270
277
290 270
Fulise 293.5 270
-

7 3.5 D

7 2:3.5
=
 Speculation Business

USD ↑

IJan 2022 31 Masc

Spot 308
Spot Rs:250 luss
so
Moch-Jutuse B:292/ USD
Msch.
Julie
15a
Patie (292)
buy 1 292
-
x

3IMSY
- Futes sell 1 x 300 30

Gain. 16

(750,000)
EntaseBy 588* &10,000
Gain 60,000
=

Beasish end -> USD will lose value in

jutes.
15am 2021 5
- spot R= 290/USD
Re.
Moc Fites. 293/UCS

I
Fatse Sell 1 USD x 293 293
1031

(240
Futes-
by
250
x

masc
3
Spot R:270
Mod. R. 270
Jut
 2
Buy Ite
40

Rate:250

2.
ty
Ol
I Jan 2022
today.
spot 260/USD
Masch 266 (usi
fute
Bought 5 Contracts
of 1,000 USD. each

Closed OutOn:-

15 March.

SpotR0:
287
-

Basis will deminish on S.L. basis.

Solution
I Jan 15
MJcb 3: Mich

Spot 260 287

Futse 266 288
6 I 0

6 3
=
2 x 2.5:
=
5
Month

Gain (los

(1,330,000)
-at b
266:
1 Jan 5,000 USD x

15
Msch. 5,000 UCD
x 2e 1,440,000
110,000
gain
Oll,
Today (Jan 2022

·USD Sold 6,000

under Mich.
Julia USD

Spot R:
165/s,Julie:168 loss
today
·

·18 March. Closeout

205v
spot
Much False 205.45 v

15 an False sell 3.000 1,000,000

160
x =
I

18 Mic Futso
buy 6,000 x205.45: (1,232,700)
loss. (222,70)

Hedging through Jubies

Step #1
v

- -
payment:Buy.

-
St4,200: 1000:7.2

v
7 x 1000

-v 7000
= USD.

IJan Futuse Rate Amout (PKR)

I6Msch
by
Future Sell 7000
259
283
(1,813,000)
1.981,000
-

Gain 168,000

Mich Spot By.

USD 7200USDX284 (2044800)
Futrse Jain 160,000
Effective COH
of 7200 USD
(1876,000)
720vse
Effects:IR:260.67
u
Isa...smod
Spot
-
35- 235
Spot 200

Fud 235 -
Fud 202. =

V
33

Future (202) Spot (235) Y

by
Jute
235 Gain 33
Fet sel
33
(202) =

Step #1
Payments:Falise
in

(3:Masch) By.

Stact: 50,00
1000
L v 50.4
=

-
Sa

=
50

50x1000:50,000
USD

Step #3 HedgeSetup.
50,000 230 (11,500,000)
e bu See
Fati
IJam USD x

16 msch 50,000 USD 256

x 12,800,000

Fatise fain 1,300,000

16 Mard.
Spot buy 50,400 254
USD x (12,801,6007
Fatise 1,300,000
fair.
Effective lost
of (11,501,600)
50,400 USD
=
50408

Effective (+/usD 1728.2:

 Step #
Receipts:Future sell

Step #2
-

17,260 =1,000
-
17.26

(17,000
~
17 x
1000:

PKR
I5an Future sell
⑪
17000
-

3587000
COMIC Fatse
By 17000 201.5
(3,425500)
Gain 161,500

Spot
38e
20 March. USD sale 17,260 x 198

Gain
Effective proceech from 3578,988
17260USD -
17,260
Effective procech/USD 207.36

Summary
Paymentin use on 16 Mich Receipts on 16 Masch

-
Futese 1x )
by Ian
IJa x
xx Future sell XXxx

16 msch Fatice Sell Xxx

-xx)
I6Msch Felise
by
Gain. x XXX
Gain X XX

16 Mich Spot buying SR (xxxx) mod

salt it BR. XXxx

Gain xxyx
Gain XXxx

effective X xyx
E05 Polach. XXXX
Let
 Conceptof tick.

Tick Size
Tick value.

SpotR:250.0000 -
254,0000/USD
Futura R:256.0000 /USD

Contract
Size:50,000 USD

Future
By 50,000v1 x256.0001:(12,800,000)
Future Sa 50,000 USD 256.0001
x
12,800,005
Gain. 5
->
~

lowestpossible
0.0001
FCRate
Change
=

in

Tick
Size

0.0001x 50,000 USD:R:5

Tich valu

Oll Today 1 Jan 2022

Future
payment300,000
USD (15 Masch)

Spot R:270-274/
today USD.

Future Masch R. 279/USD

Contact 60,000
size USD

On 15March. Ww

spot R:296-299/USD
Future B:300/USD

Solution

Step #1 Payment -> Future

by is than
Closeout Witt sell.

Step #2 300,000 USD.5Contract

60,000 USD

Step #3
Hedge Setup.
18 or ot
Festuse
Future Bysen""us' 25
15am
Is Msch

Gain. ~
6,300,000
OR.
1279)
buy
-
Ticks
Se 300 v
 Gain -21 x 10,000 Tich

Tic
210,000

Tich vale 0.0001 60,000:5)

x

210,000 x 6:
(1260000 ~

Gain / contact

1260,000 Contracts
x 5 =

6,300,000

Spot Buying 300,000 x 299 (89,700,000)

Filese 6,300,000
-

Gain
Effective (at (83,400,000 C
300,000
=

1278/USD
②

v
-
-

Step #1 Receipts (FC) >

- Future Sell then

Future
by to close out

***2 Contract

2,000,000 16.67
-

120,000 = 17

Coverage 120,000 USD x 17

2,040,000 USD.

Step #3 set
Aup
Future Sell 213.5
(218.5)
Felise
Buy
(5)
 loss intesms Tick 5x 10,000
of
50,000 Ticks
Ion I but aut
Total loss (Tick) 50,000 x 17
850,000 Ticks

0.0001 x 120,000:I
Tick
value
of a

&50,000 Ticks 12:

x
(10,200,000) a

S1+ See USD (2,000,000 x 218.5) 437,000,000

Future los (10,200,000)
Effective proceed 426,800,000
-
2,000,000 USD

Effective Rate (USD 1213.4

Alternative Melod

Future Sell 2040,000 USD x213.5: 435,540,000

2040,000 USD (445,740,000)
Future
Buy 218.5:
x

Ion
Juti, (10,200,000)
on
MSKt

Spot Seuss
(2,000,000 USD x 218.5) 437,000,000
Future you (10,200,000)
Effective proceed. 426,000,000
!
2,000,000
USD

Effective Rate (USD

IR:213. 4/ USD
 Cusiency options.

I
ARM R:
spot: 150-15410s -

5,200 USD 3 Monte

Good:Re:158-162/US$
3months lates.

Payment ①
Deales- option

E.P 140 v

Jan spot 154

premium Intrinsic 14v
value.
5,200 x
24
10 v
T. Vale
124,800
Premium 24 Y

31 March. (3 months lates).

Carel
Spot R: 190-195TUSD
MV= 195 X

E.P: 140x

Cost
Effective
from option:5,200 x 140728,000
Premium 124,800
-

Total Costof 852,800

5,200 USD -
5200

1164 /us
Care 2

Spoton 31 March R:128-132/USD

M. Psice 132 v
140
E.psice
Cost
Effective
Isom (5200
Market 132)
x 686,408
Premium 124,000 a

Total bitof 811.200

5200 USD
=
5200

1150
 E.p-
E.P<M.P --
option will be

M.P- Enescived

"In the Money"

EP> M.P - option will not
be excessived.

"Out
of
the
Money"
where have
option we a

sight
to
puschan something
=Call
option.

Di
SIMSch
Payment to be made 6,350 USD

Today I Jan.

Spot today
R: 20-4/Usp
can option
Contract
size 1000 USD
·
-

-R:2'85/USD
L

o
E.p
·
Premium B:/UD

On 31 masc.

① Spot 302-304/uss.-
② Spot 285-269/03D -
v

Cone(1)

On 31 March 6,350 6.35

=

1,000 6
=

304/USD
M. Rate:R:

E.p:R:
285/USDU Coverage 6,000 USD

Remain
350 USD

Cost
Effective
From
(Hedged
option postion6000 285 x
1710,000
I

From
(Remaining
MICA

Premium
postion) 350x304
(6,000 7)x
106,400
42,000
Total lost 602 6,350 USD.
1,850400
 Effective Rate: 1858400 :
6,350
·1292.66

Case (2)

On 31 March

Spot Rs: 269 r

Epsic Re: 285

Effective Cost

From MK4
(Hedged postion) (6,000 x269) 1,614,000
From MK4
(Remaining postion) (350x269) 94.150
Premium (6,000 7)
x 42,000
Total
Cost
of 1,350 USD
1,750,150
I
6,350

Effective (t(usD (275.6

Call
option
In the MP>E.P
money
·

we encexcise and purchase

use

at E.p (which is cheaper (lowes)

Out
of the money
·

MP LE.P

we will not encecise

option.
(Since USD is
cheaper in
MKt)·
 CURRENCY OPTIONS -
PUT OPTION

"Right
"

to see
·Jan 2022 31 March 2023

⑦ 5,000 USD

ARM

I
Dealer

Spot:Re:215
Food:Rs.220
option: R:224 E.p.
Spot 2 (215)
I.V. 9
T.V 5
Premium. 14 250
MIC-
MR < E.P
224 -

215 I
E.P.

200
S
M12 224 M127 Psice
price X [40
205 NK+ v
EnCes Din

care) USD
spot:Rs:205 (3/MSch2022

E.P 224 ~

M.P 205

Proceech. (5000x224) 1,120,000

Premium (5000 x 14) (0,000)
Net proceach 1,050,000
↓
5000

/Effective:210/USD

Cam22) Spot 31Masch 2022 Rs:240

E.P 224

M.P 248 -

Psoceech
From 5,000 x 240 = 1,200,000
MIA
Poemion paid
(70,000)
25,000 x(4)
1,130,000
 RS:1,130,000 5,000 USD:226/USD.
=

Summary

↳P] highes
Proceed (highl x x
xX

less:Premium paid (x xxx)

Effective XXX X

Poolach

Oll
·

Today 1 Jan 2019

·
Expected Receipts
10,400 USD (3moni)
available R:282
·
Put option at v

Spot
today us 379lusis
·

·
Premium)
Contract
size 1,000 USD
·

Spot Rs:
31 March 1
290-294/USD
:

on

2. Rs:260-263/ USD.

Solution

No. Contracts: 10,400

of - 10.4
1000
18

Covesage:10x1000 10,00003D.
=

Caris
Spot on 31 March

Rs:290-294

282
E.P
M.P 290 v

Effective proceed.

Hedged postion (10,000 290) 2,900,000

USD x

Remaining postion (4000S1 290) x 116,000

Premium (10,000 USD 5)
x (50,000)
Effective proceech. 2,966,000
=

:10,400
1285. 19
Cone (2) Spot on 31 March 260-263/US$

E.P 282 v

M. P 260

Effective proceach.

Hedged postion (10,000 USD x282) 2,820,000

Remaining postion (400 USD
260)
x 104,000
150,000)
Premium (10,000 5)
USD x

Effective proceed 2,874,000

=!
10,400
276.346
>

Decision
making
E.P 200v
=

250
Call 200
option M.P:250
(Sasta Phaxedo)

E.P
v

Putoption 200 250

(Jahan zyada M.P2504 200

wahan
paisay milain
bech do

Types of options

M I I 1 I in
↑

3 Masch.
15am
5000USD

Call
option Ep:Re:200 -

Mp 268 =

Mp.295
Encecisable
·European only
at
option
Date.
Maturity
American
·

option - can be excised

any
time

upMatusity
to Date.
·
Bermudian option. ->
Multiple excise, date.
Multiple Encercise prices

How to pick. Relevant Ex. psice.

· Best

i can
Ames
· 10 April A pil
25
~ .
May May

1
W + 113 ·
15Jun Jue.
~I + 11I
W ~+ 112
· 5 July X

· 9 Apsil April

Cal. 107 · 10 JEJue

Ep Ps +
=
Pick.
louent Ytt: isthe w

2017

X 32 X

15 10,000.
-

V
May
w

102 -
6:96
105 -
7: 982
110 -
13 = 97

E.p -

Psem:Not Collection

highestpick
Rel date
be baad
· Month
wall
fixKasain. an

pick.

· E.P. Call Ep+Psem2 lowest

PutEp-Psem- Net tighest-

 - -

~W
e put option.
calloption

-- v

I ~ ~
I

L -
- -
-

-- -

Receipts Covered
by put option

Expected Receipt
I
date: 13
May
Contract
:May putoption.
So I can blu
sell USD
anytime
1 Apsil 31
May.
-

2
Bast E.P

E.P XXXX 102 105 110

psemion (xx) (6) (10) (13) u

XXX
x 96 95 974

we
picked 110 -

3 # Contracts
of
4,520,000 = 90.4
50,000
90
=
coverage
50,000 x 9
4,500,000
3 Decision on 13 May.

Case 1 E.P 110 vv

MP 107
 Effective proceed.
4,500,000x110
From option (Hedged postion) 495,000,000

(Remaining 2,140,000
From MK+
20,000 107
postion x

pemion paid (4,500,000 13) x 158,500,000)

Net Pro Leach. 438,640,000
-
USD
4520,000

Effective Rate197.044

Can2

E.p. 110
v
112
M.P
=

Effective proceed.

Hedged postion (4,500,000 112)

x 504,000,000
Remaining postion (20,000 112
x
2240,000
Premium 24,500,000 USD x
13] 150,500,000)
Net Proceed 447,740,000

USIY 4,520,000
effective wate/uss. 199

Call JUNE
option for paymentin

is month

Jone.

27 Best E.P

E.P XXX 104 1106 109

Prem XXx
15 qu 7
XXXh
19 115 116
=

37 Contracts. ~

8.515,000 136.24
=

62,500.
62,500
136 x =
18,500,000
 4) Decision I
-
06
E.P
M.P

Cost
57 Effective
Hedged postion (8,500,000 106 x 901,000,000
Remaining postin (15,000 109)
Premium (8,500,000 9)
x
x
1,635,000
76,500,000
Cost
Effective 979,135,000
-
USD
8,515,000
Effective
Cost
(USD (R:) (114.9

201
5) Effective
E.P 106
M.P 103 r

Hedged postion (0,500,000 x 103) &75,500,000

Remaining postion (15,000 103) x
1545,000
Premiu (0,500,000 x9) 16500,000
W

Effective lost 953,545,000

-

USD &.515,000

Effective cost per use. III1.9

 Interest Risk
Rate
Management
is Forward Rate
Agreement Neves
2)
3)
Interest
sate
Interestsate
Jartusen
option. Tested

Interest sate fill

N I
I am 31 March
2022 2022

I
300 million.
Bossowes

Kibos + 2%
Empacted Rate Y
12% 2==14%
+

15% - 16%

12Y

D ⑪
IJan 31m asch

2022 2022

500 Million.
⑧
- Inventos.

ARM

Deposite:Kibus 12.
12%

9%-8%.

Summary
2017a
Bossowes -> Future
bossowing
4
I
ints. Rate.
due to in

2 Investor. Infuse investmentincome t

due in ints. Rate.
fall
to
Forward Rate
Agreement
Agreementof capping interest bath.

Fining

X
=

Bookes Bank providing

providing
loan at sate
MK+
FRAN
-

19%
FRA
17%
-
-

15 am 2019 31 March 2019

Rs.300 million
Spot:14%

31 March

Spot:19%
to bank. (300 19%)
x 57
From FRA
(300 2%)
x (6)
Net
bossowing lost
El
Rate
Eff
bossowing =

51/300
117%
FRA Bank.
7

(19%) 117%
2.
A
CAR2
31 March

sate:13%
Spot
 Tobank (300 13%) x 39
TO FRA 12
(300 x4i)
51

51/300: 17%

FRA
I
Bank.

(13:)
(4)
I

Flow cash
of
1 From to
FRA Co.

when Mist Rate > FR.

2 From Co. to FRA

When FR> MR.

Picking the
sight
FRA + Rate
&Mouth.

2 months
6 month.
N I I

bloct
Masch 30
April
Tension
iocm Repay. of
low
Obtaining
Date
Ilan Datel
⑦ ↑ ↑
2x &

3 2
A I
3mouth.
a
3 IMsch
3:
May

3x5

Re: - FRA
3 months lates loan
for a Month.

x 3x8 - 52 -
5.8
-3 x 11 - 6.1- 6.3v
DR BR.
Oll

12
Nov
Msa
N N

I
2 5

R.D
A D
4.D LD

X
2x 7

Mkt Rate 17' =

FRA -
15%

Solution
to Bank (10,000,000 17%x5(12) (700,333)
x

From FRA
(10,000,000 2%. x5/12) 83,333 x

Net
Bossowing
cost
625,000
625,000
x 12 =

5
Annual into. Cost 1,500,000
=

1,500,000 =
10,000,000 15%
=

What
is kibos.
K IBOR.
A 10 %

B 5 Statebank.

25.
11 I

>
2 9%
7
10% 10%
7
7
D 12 11 i.
25%
12
%% 10.5%
E I

I Bond Vallation
MR
his par

O ARMAAA
Kibos 100

7
Bank ICRC
BB B 7
·JCR-UIS
I JK.
Kibus + bY ·PA KRA.

+2.-> spread
Nate
 FRA 14% k 2
+

47%.+ 19%
21.
=

3%

FRA
only.
Kibos
with

-
-

X
-
-

BR BR
-
-

-
I
17.25% + 2%

Solution

3 O
N I I
30 NOU
15an /Apsil
2022 2022
Loan
Repayment
7. Date Date.
Date

3x11

at
FRA
pale
Bossowing
Hedge Setup (NetDay)
tobank (400 8/12 19.25%) (51.4333x)
x x =

From
FRA,7.25% -

14.3%)
7.86667
400x8/12 x2.95%
436661
43.466667
12
x 65.2
=

8 A. I. A.
 65.2=400: 116.3%
FRA:M.3%. 23=16.3%
+

Rate FRA
EG). +
spend.
=

E
-

smonth 3 Mot
UV
M I
0 6 month mont
a

6x9

Libos + 0.5%
v X

Spot (libos Libos

dry
to 5.25%
--
spread

65%+0.5%
Effective Payment
To bank (10,000,000 x 7%.
3/12 x (175,000)
From FRA
(10,000,000 x
3/12 x 1.2% 30,000

EJJ. bossowing (145,000)

Lost
FRA:
5.3%]
Libor 6.5%
=
1.2%

EfJ. Rate: 145,000

x 12
3

580,000 10,000,000-

Egg. bossowig5.8%.
Jate-

53%
+

0154:15.8%
 -

1%.
100 BPs
=

L 0.5%
+

3month- 12 Month.
I
B 3Month ismonth.
3x
15

FRA= 5.5% 0.5

MRate = 6%

Net
Payoys
To bank (10,000,000 x (6% +0.5%):(650,000)
From FRA
(10,000,000 0.5%)
x 50,000

Bossonig but 600,000

-

600,000 600,000
12
x
=

12

% 6%.

FRA+ Spread.

5.5% 0.5%
+

16%
InterestRate
Fuliss

I
p
-
Y
I am
X I
~
31Masch 30 June.
~

loan Loan Repayment

Today date
obtaining date.

v -

spot:12% 2

IRF:13.7% S 207:16%
lock in
Rate:113.7%-

500,000 13.7%.
x x
3112: T,125

I
7

⑪ v

I am 3:masch 30June

Today
Investment Recovery Date.
Date
-
Spot:12: spot: 10% 7
IRF:113%
%

500,000 x
13 xx3/12 1,150
=
 Rate
Key Date and
Key

is Antuse Contract
27 loan contact

IJan
a 3/Msch 30 June
Y

Future Conts. D

open. Futie Cont

Close. -
13%
loan contact Loan Cont
W clok.
open

Rate
Convergence
0.54.1 0.5%1, 0.5%. 1,

-
I Jan 3150 28Fes 31M64

Spot= 12% Spot:14% I spot:11% spot:141]

I
Future:(13.5% /Fli 15% /Zet=11.5% 1 Fut:14%
~ W
- v

FARM I
A I
-
~
A.0.
Ali
T.T.
W
~

15%
14% 14% 14%:0

13.5%
1.5%
12%
11.5%

11%
 Speculation Bs.

I Jam 3mmsch 30 Jul

Spot:12%
~ locu inRate 13.5%
Futise:13.5%

I
san loa
contra contact
-
v
close.
open
-
v
-

Spot:17% A
I

v Inv. ~
Fate, 17% Invert
r Maturity

On 31 Msch

loa obtain 500,000 x 13.5%x3/12

(6,
=

Invertent 500,000 17%.

x x
3/12
sain. 4,275

Oll
On 1stJan

spot:11% loan Amount100,000

v
Mich 14%
juticc
=

& 14%
obtained a loan under masch
Julie
31 Masch

spot:187
Masch
Julise:18%
thecontact by
ane
Cloud
out inventing
-

RU: calculate
NetSain/lon.

Jan cont - loan on 31msch

loan obtain (700,000 3112)

14%. x
x (24,500)

InvestmentContract
(700,000 184
x x
3(12) 31,500
3'mschbut ->
Invent-3/MSch.
700
Net Sain I

- -
- -
O
 is
what meant
by close out

loam contact
obtaining
is crossed by
contract
Inventing
IJan

spot=12i
Musch
Jutise:1%
loan obtained Re:1000,000 Is. (loan receiptdate
-(Msch)
31 Masch

Closed out contract

in
above
by inventing
MYch
Julie & 18%

Spot: 187 on 31 Moch.

Reg: . Net
gain (low
Solution

I Jan 31 Masch
30Jhe

loan
DY?
obtain: 14%
-

Invent :y
Y

Intestpayment(1000,000 M1.x3/12) (35,000)

x
=

Ints. Receipt(1,00,000 x 187.x3(12) 45,000 =

10,000
=
 Early close out

I Jas

spot:12%
Future:1 ->we sold
fals
Contact to
obtain loan on 3YMasch n
11%
15 Masch
of R:
60,000

spot:18% I Elisa
Fate:10.2% we bought
e
Contractto Invat R:G on 3 March & 18.21

Reg:.
calculate
-
net
gain (lou.
Solution

Ints to be paid (013050m) 600,000 x

14.xx12 (21000)
Into to be Received (n-1) 600,000 18.2%.x9/1227,300
x

6,300

term Selling IRF

of
and
Buying of

⑦
iss neg
20.

Debt Inventos.
securities.
sell Buy.
loan obtain= Securities
Debt
Selling of
Secusitia.
Investment:
Buying of Debt

15a
-

MochFutis 600,000 Sell &

14%
31 Mich
15
Mod

Much Future 600,000 Byly & 185%

Sell (loan obtains (14%) 600,000 4.5%. x3/12

x

By (Invent) 18.5%
4.5%-
16750
 all
Ian

Sold 5 Contracts Rs.200,000 each

valuing
·

0 12. BY

Spot today 11%

· is

Much
future having 3 month
coverage.
·

15Masch

· Purchased Contracts
5 a 14.2s.
to close out

Spot 14%
today
·

Reg..
Calculate gain loss.

Falise sell
(bosowig) (12.8%)
(Invert I 14.2%
Fatese
By 1.4%

200,000 x 5 x 1.4% 3112

x
(3,500
=

all

I Jan

spot 10%
87 (100 87) 13%
Future Masch
-

R.400,000
valuing
5 Contracts sold each

15
Masch

closed out
each
by
D
buying 5
&3.5
Contracts
(16.5-s)
of R:400,000

day
to
spot
Reguised
Gain (loss?

Solution

Future Sell (Bossowing) (13%) -

Futis
B (Investment) 16.5%,
3.5%
I
All
I Jan
13%
Spot 85.4 (100 -
854) 14.6
Future-March
R:500,000
valuing
7 Contracts sold each.

15
Masch

Closed out
each
by buying
way
Contracts
7
19%
of R:500,000

spot
day 18.75%
to

Reguised
Gain (loss !

False sell 85.4

(81.0)
Fatis.
By
4.4
Gain: 7x500,000 x 4.4% 3112
x
(38,500
=

InterestRate
Jutises for hedging of loan.

I Jan

Spott 15%
~
Ints. Rate Future (3month. A
Juli 8l

Loan Amout
(on 15Msch) R: 500,000
for 3 mouth
Conts. Size :100,000

15 March I
20%
Spot
Ints. Tate Fate. (3Mouth Mich
fats) 79.7

Reg
Setup hedge
I
· a

Find Rats
egg. bossowij
Station (174)- Y
D 1-
1

Hedged
·Ja 3 IMs- 30Jve
Setup r
28s
A Future sell 03 w

I5M Fato
buy. (79.7)
3.3V
Entire sell &7
(83.5)
Futiso
Bu
Gain 3.5%

400,000 3.5%.
x 5x x
3112 (17,500
=
 Spot loan (500,000 31,2 x20%(
x
(25,000) -

Gain (5x100,000 x3/12 x 3.3%) 4125 m

Net Int. Eep (20,875)

=
~
20,875 x 122 & 3,500 Annal int
3
500,000
16.7% E08. bossoms as

3 M un
·Jan bojue

15
March
Ane
I 3IMs
7
(17%)
20.3

3.3%.w

M 1 -
get
15 mich fianc. 1554g

(200)

all

ot to day 12.
Loan Raguised Rs:2,350,000
Loan Required on 28 Feb 2020
Loan Reg. 3 month.
jan
Contact Rs: 150,000
Size

bossowing applic to 2. K-1.5%

87.00 (15an)
↳Mon 1 Masch Julie
Feb
-
Spot 16%
Futin Mich. 83.5

Required: -
Effective bossowing rate.

Solution
-

Contracts
Hedge Setup
15am FatueCell 87 loane2,350,000
Zeis
Buy 1835
Fatse 150,000

15.67 = 16

Gain:16x150,000 3.5x,
x
x3/12
121,000
 Spot loan

2,350,000 3/12x ( 16%. 1.5%):(02,813)

x +
Y

Gain 21,000
Jatic
on a

Net into. Cost

8,013
Rate
Effective

&1,413 12:
x
327,250

327,250:113.93%
2350,000

3 Mont 21000
A

·Jan
D
204s
voielimasch.-------- ojune
~
15m Contract that on 31 much I will obtain
a loan 2,400,000 & 13x. (87)
of
~
2&F
Contact that on bimard & will deposit
2400,000 an invertent & 16.5% (83.5)

~28 Feb (161.K + 1.5x)

from Bank17.5%
loan C.
spot
2350,000

Payoyint 2,350,000 x17.5%.x3/12

1102,813)
Gain 21,000
&1813
Spotinto gain I

Spot into lon.

+

--
-

Futess Sell 91 Contract

Future (88.5)
Buy. 2.5.
1,000,000 x lo
 Gain (10,000,000 3/12 x 2.5%
x 62,500
Pain.
loa.
spot
10,000,000 11.7
x x
4/12:(275,000)
Gain 62,500
Net Bossowij 212.500
Cost

212,500 x 12 850,000
=

850,000 18.5%
=

10,000,000

Different tenuse loan

O Aslan 3month500,000 16%

① A li 3month 500,000 2

into, bank
to
(500,000 x 3/12x (6) 20,000 =

(500,000 x 3/12 2 -) (2500) x

17500
I

17500 70,000
12
x
=

I 14%
3
500,000

⑦ Aslam 500,000month. 16%

O 1500,000 Month"
>
2%
li
A 3

tobank:500,000 x 16 x6112:40,000
From Ali:500,000 x 21 x
3112: (2500)
37,500

37,500 12
x = 75,000
500,000
(15%
=
Y

500,000
6/12
x = x x 3/12

(x 1,000,000
=
 ⑦ ~500,000 6 month 16%
Aslam

&Ali 1,000,000 3 moult 2%

->

to bank 500,000 6/12

x 16%:40,000
x

Esous Ali 1,000,000 x 3112 x 2x

(5,000)
=

35000

35000 12
x 70,000: /14",
=

500,000

123456500,000612
123 500,000
3/12
123 500,000] 1000,000

Ran Amount - 600,000

Tesm 2 smowth
10 Jan 2022
Today I

close out
Loan Reg on: 18 Msch G023
Easly
loan:87
Mschfuten for 3 month

Spot (15an2022) I 12.5%

On 18 Masch
Re:Effective bossowing
Spot = 16% cost a Rate.
Masch
Julse=83.8
Solution
Adj Amount
for Julia
Hedge Setup. 600,000 x
6112 2
=
x
3/12
Future sell &7
Fates-
bu 183.8) 12:1,200,000 =

32

Effective Bossowiy Cost

Spotloan (600,000 6112

x x 16% 40,000
=

From IRF (1,200,000 3112x x 3.2.) 9,600

(30, 400)
38,400 12
x 76,000
=

6
76,800:
112.8%
600,000
Intesent Rate Conves
gene
I Jan 31Ja 28 Feb 3 IMsch

Spot 12 % 14% 16% 194

Future 85 15% &Y 16% 83 17% 8) 19%
3% 24- 1 -

-
Basis

-
Futse 16%
- Spot 13%
3%

15
Jan 31 Msch.

Jan 16 16
Feb 28 28
Maa 3 I 20

75 -

61:11
20 march (identify Fatse Rate) -

Future 10.44% (100-18.44 81.56

3%
18 Y 11 0.44%
Spot
=

75
0.44%

Hedge Setup Amout Adj

Future Sell &Y

360,000x5/12: 2 3/12
x

Fistase
Buy (81.56)
gain. 2.44 1600,000 50,000
=

Gain (R:).12x50,000 x 3/12 x 2.44% 112 Contract

13,660
loan on
spot (from a Comm. Bank)

360,000 5712
x 18%:
x (27,000)
Sain 3,660
EJJ. bossowing
2017
23,340

23,340 12
x
56,016:(15.56%
=

360,000
all

Basis
Future 15% (100 85)-

-
Spot 13.5%
-
Basis 1.5 y

Jan 20 20

Feb 28 28
Moch 31 22

~ 79-70
=
19 v

22 March
Julie Rate. 1.5%
-
79x9 =

Falia"17.171% I 02.83 0.171%

Spot 17%
0. 1717.

Ad;Amout
Hedge Setup.
Fatise Sell 85- &70,00x7712 2
=
3/12
x

Fatis. 182.83)
Buy 870,000 =
3 x 7
Gain 217- ~-
v

12,030,000:100,000
Gain (Rs:) 20
20.3 =

20x100,000 x 3/12 x 2.17%

110,850
Spot loan

870,000 5/12 x
x 17%: (86,275) -

Gain 10,856 -

EJJ. bossowing (75,425) -

Lost

75425 x 12
129,300:(14.86%
=

870,000
0
-

Hedge Setup. AmountAdj

Future sell 92
xx3112
e
300 0/12:
Future
By x

Gain 300 3 x 8 000

=
:

Rs:
Gain (Rs:):800 3112 x2%:
x 4 Million

Sain

Spot loan

300 412
x x 8.5%:(17)
Sain
Effective bossowig, 3
Cost
13
⑧
X 12:
195 16.5%
=
 Empression of Rates
Interest

Intesent Rate:15.05%

Idigits
decimal.
after
lowest
possible intolate:0.01%
change in

Tick date:0.01%
size for
intent

all
Fulitedate:04

Today:
Contract Size:
15 Jan
R:500,000

Always jut
= 3 mouth

False sell 84.00

(83.99)
Future
buy
0.01%.=0.01:1 Tich gain

uuur

500,000 3/12
x 0.01%
x 112.5
=

Tick value value

Tick value.Contact Size x x Tize

500,000 4/12
x 0.01%
x

=
112.5 I
E

all
Coverage
Contact
under Fulise:92 Contracts

size :500,000
total terms Tich
gains in (confsact:112
of
Tichs

Required
-

Total
Calculate Sain
Jutin mit
on

Tich 0.0 1.
size
Tick value:500,000 x 3/12 x 0.01%12.5

112 Tick x
12.5 x 92

I Total
gain. 128,800
-

Step #1 find #0J Tick

you Sain/loss
Fatise sell 92
Fatise
By (90)
23. 0.01,
= 200 ↳
Ticks.

Step #2 Calculate Tich value

Contract R:1,000,000
Size =

1,000,000 x 3/12 =125-

x

Step #3 Adj Amout

300 x3/12
x
8/12 x
=

12 800
=
Millio.-

*** Total Sain

800 Million (Millia800 Gutsal

800 200
x
25:14,000,000
x

↓,
Contact -Sain(ich
"Tich/couts an

Alternatively
800 x 3112x2%. :(4,000,000
 -

Step#1 Total Ticks

Fuliso Sell 85
Fectiso
Buy (82.3) ~

2.7 =
0.01:270 Ticks
I

Step #2 Tich vale

100,000 3/12 x0.01%:12.5-

x

Step #3 Adjuted Amout

870,000 x7/12 3
= 3/12
x

870,000 +
3 x 7:2030,000

2,030,000 =
100,000:20.3

= 20

Step #Y Total Gain IIon

20x270 x2.5:
(13,500 Total Sail

Spot bossowing

870,000 x 7/12 x 17 =
(86,275)
Sain 13,500
Net
bossowij st (72,775)
Eff. Bossowig Rate:
72775 12:
x
127,757

870,000

Eff. Rate
of Bossowiy(14.34%
A
nativee 85
Futse
By (82.3)
2.7j.

2000,000 x 3/12 x 2-74:

(13,500
Spot bossowing

870,000 x 7/12 x 17 (86,275)

=

Sain 13,500
Net
bossowij st (72,775)
Eff. Bossowig Rate:
72775 12:
x
127,757

870,000

Eff. Rate
of Bossowiy(14.34%
 InterestRate IRG
option

N I I

I am 31msch. 30 June.

100,000
~

14 FRA:15.25%
spot:
Spot:18%
Spot:12;W

A I I

⑦ 15am 3 Masch

loan
30June

spot:14% 100,000
X

as spotit. 19%

-
15%

Strike sate-1e

premium 0.4%
=

Case (a)
loan Comm. bank
from 19%
(4%)
Payoyys of IRO
15%
Premium paid 0.4%

154,
100,000 15.4%
x x
3/12 13.850
=

Carbs
loan 10%
from
Premium
CB.
0.4%

10.4%

100,000 x 10.4%, x 3/12:12,600

-> M.R/Spot) Stile Rate

loan forum. bank a MR xxxx

option len: Receipt form Booke.

·

(xx)
(MR -

SR) Ne+bit x x x

Add:Premium x x x

=60. Bs. Sin XXX

->
Spot/MR < Stike Rate.
lapse the option just take out E88- bossmig
Sost
loan & MR
from comm. back xxxx -

Add: Premium
-
X
-G
x x
x
 ⑤)))))

Case(i)
-
Bank 11 % Y
a

Option 12:7%

Kibos
Bossowing Cost
Effective -

( 2%) 11%. +

Arts bank (10,000,000 13% 3112)

to
x x (325000
Premium
(10,000,000 0.6% 3112) x x 115,000)
ENJ. Bossowig sit 340,000
-

340,000 12:
x 1,360,000
3

1,360,000 10,000,000
-

113.6%
Bank loan 17. 20 13%
+ =

Premium 0.6%
13.6%
-
Karez)
Bank:16%
option:12.7%
2i)
in 3(12) (450,000)
16%. +

Ints to bank (10,000,000 xx x

inglow from option (10,000,000 3.3%.x411)

x 82500 I

Premium
(10,000,000x0.6%. x
3112) (15,000)
Effective bossoig 382,500
Cost

382500 12
x =
1530,000

1,530,000
/15.3%
=

10,000,000
tobank (167 + 2%.) (18%)
From 3.3%
option
Premium (0.6%)

153%
Commodity
Frubies

Future Sell 130,000 (Tody)

Future (145,000) on sellentdate.
By
(15,000)

Total Fate 102 15,000

= x 15: (225,000)

Spot sale. (14.55x 145,000) 2,109,750

Future lon (225,000 C

E06. Proleech 1,8&4,750

1884,750 1.55:
=

(129.536

Solution

24.2 =24

Future pusch. 605,000:(14.539,200)

24x
Fatuse sell 24x702,900:16,869,600
Gain. 2,330,400
-

spotpusch. (24.2x702,900) (17,010, 180)

Fulse
Sain. 2,330,400
-

Net
pusch. Cost.
(14,679,780)
-
CommodityForward

14.55 tons x 130,000 1,891,500

=
Financial Objectives. Stable
Y
Long term Mobilite
Equity Assets
get profit.
to
encashed;
Asset
7
Debt
~
Looking cap. "Optimise
2
·Cash "stoon" Receivables - Not exanive X

"Timely pay off R

Not Enkesw. X

'Reduction Cost Appropriate

v
in
of capital. -

summed
up
~
is Reduction in Coc
liabilities.
~2)
Timely payment
of
~3) Optimise
King Capital
was

~ 4)
stability
in
profitscollection
5) Smoth and Receivable
timely of
Hindsences
in
achiving Fin.
Objectives.
(a) Accen
Capital
to

Equity How will we

get
Debt
Trital itwhen we medit

(b) Interentdate.
on loans obtained (4 s adversel

Interest sate
investment.
(It is adversel
on

1) Commodity
prim
Inc. is ade.
Input(817)
Pain
of Goodh/Service Panon
output(Revenue) increase in

20st
is
difficult
1) Fo sew Rate
Paymentin Fe
-> adverse movement
Foren Rate
for
is not good.
Receiptin Fr
(e) Collection Receivable
of
be encashed.
Profit but not
eased might

16) Liquidity
of Arsus

Realisation % Should be
high (if not:Risk).
 INTEREST RATE FUTURES FOR HEDGING “INVESTMENT”

Today
~Loan
(Jan 2020

Pea:104,000 (5mont)
·Today
·
Invent
tobe
15an 2020

made 104,000

·
IRP Contact
Size:100,000 you smonth

Kibos:16 Conts Size 100,000

Spot Y
·
· -

Spot
Dossowing Rey
·

sate K42%
·
kibos 16%
Loan on 18 March ·Investment date K-1.5%.
Much El &
fate Mich
jute
· ·

·
loan obtained on I8Msch when Imade on 18 misch
Kibos 22% when 22%.
was
spot (Kibi) was

Mich
Julia 18Msch 77.6 Mich
Juture on 18 Mc 776
·
· on

gene
Solution
I
(81)
-
Isa Fetise Sell" & 19% 77.6
I8Mod Estes e
by
v
(77.6) 22.4%
-41)
Gain 34%

2 Contracts -1000 5/12

x x
=

x3/12

104000
5712
x x
=
x
3/12 1173,333
173,333 Contracts:I Contract
2x 100,000: /200,000
173,333 100,000 1.7
= =
a

Contact 2x100,000
Coverage
Spotinvent mat
=

1200,000
104,000 x 20.5%.
5/12 0.8&3"
=
x

loss
3
Effective pay of interet on
Julia met
-
(200,000 x 3.4%. x 4(12) (1700)
Spot (104,000 25%x5/12)
-
x 10,400 7,83
Gain on
Julies
(200,000 3.7%.x3112) (1,700)
-

x 7183:5 x 12: 17,239

Net Cost
interent 8,700
17,239 107,000
=
(16.58%
=

8700:5x12:20,000

20,000 104,000:20%
+
 I

Future buy
v
~
14.5%-0.5%
-
-

->
Jute sell

Step #1 Hedge Setup

(81)
Future
Buy-
Fatise sell- 85.25
Gain. 4.25%

Step #2 AmountAdj & Contract.

10,250,000 x 5112:2 3/12 x

17,083,333 1,000,000
=
x =

Contract:17.08
E
I 17 Contacts

Coverage:17x1,000,000:17 Million.
Step #3 Spot inventoat (on 18 March)

10,250,000 x 14%x5112:597,917
Add: · Fatuse gain
MIt

17,000,000 4.25%x3112:180,625
x

Total intestincome 778,542

Received

770,542 =
5x12 1,060,501:10,250,000
=

/ Effective investment:18.2
 I

Step#1 Hedge Setup.

Future
By. (89.4)
Sell 89.35
0.05
-

Step#2 Contract.

3,000,000 =

500,000:6.

6x500,000 3,000,000
=

3,000,000
x
3/12 21+3112 X
=

Step #3 Investment on
Spot
3,000,000 x
10.15%x3112:76,125
loss on
future
MIH

Net
3,000,000
Income.
intesent
0.05%
x x3/12
so
75,750 +
3x12 303,000
=

110.1%
-

3,000,000

InterestRate
Fulises

For obtain loan For Investment

Future
(Bossowing) Futise
lending

Step#1 Step #1
Today sell
Julie
xxxa
Today
Fatise
by (xxx2)
Step #3
on close Bu Julie (x 1)
x x

Step #2 Future sell X+

x2

Out
Date on closeout
Gain xxx
date. Gain. xx x x

it Reduce it
will increase
will
effective
ous
,

>bossowing but interest income.

INTEREST OPTIONS FOR HEDGING “INVESTMENT”

·
I Jan
today
16 Masch
· loan 400,000
=

for 3 month.

Spot:
·
16%
Strike
option (Dossower;option):
·
sate:17.25%
·
Premium:0.2%
Contract
size:R: 100,000

16 Masch
A b

Spot= 22% 14%

Solution

Care (a)
Decision on 16 Masch

spot:22%
Strike Rate:17.25%. U

Spot transaction

~loanfsom
C. Bank (400,000 x 22.x3112) (22,000)
-
From Int. Rate op- (400,000 445%.x3112) 4,750
x

(17,250)
400,000 x 4.75%. x 3/12

premium paid (400,000 x

0.2%x3(12) (200)
(17,450)
17450
I

x 12 =

Car(b) 69800:400,000 (1745%

Decision
=

Spot 14%u
=

Strike Rate:17.25%

Spot transaction

400,000 x14%x" 112:(14000

-

Premium

20
400,000 x 0.2%.x3112:

56,800 400,000:114.2%
100
=
12
=

x
 ·
I Jan
today
16 Masch
· Inventant 400,000
-

for 3 month.

Spot:
·
16%
Strike sate:15.6%
option (leaders option):
·

·
Premium:0.2%
size =R:
Contract 100,000
·

16 Masch
A b

Spot= 22% 14%

Solution
MKH 22%"v
cau (a) =

Decision
Strik:15.6%

Spot transaction

400,000 22%
x x3112 22,000
=

Premium
400,000 x0.2%. x3112:( 200)
Net ints. Income. 21,800

21,800 87,200
121.8x
~
12:
x
=

3
400,000
Case(b)
MKH 14'
=

> 1.6%
Decision
Strike:"15.6%.

Spot transactions

From (B 400,000 14" x

x 14,000 3/12 =

From
option 400,000 x 1.6% 3112:1600 x
I

Premium 400,000 x0.2%x 4112:(200)

into. Income.
Net 15,400

61,600 115.4%
15,400 12:
x
400,000
=
 Intercit safe option

(a) used
bus bossowing
7 ij Mist

lowes
ate is

·Excercive Rate) Stile Rate lapse the option

if MKt
low
Sch
and obtain from
MICH

3) Investment
·
Encessive
if strike Rate) tate.
MK+

-
5,0)? if mist sate is

high them in
invent

the
MKand
lapse
invent
option and

in MS.

Today (Apsil

0C
-
-

-
-
14.5%
-

Premium 0.25% (Missed)

in
Q.

Contract
&,160,000 1,000,000 0.16
= =

Rounded to & Contract

Coverage &x1,000,000 8000,000

=

unhedged postion:150,000
Decision
Kibos-
MICH 114.5%
-

only
8000, 000
option 18.5% Y
Effective intoincome -0.5%)
(14.5%.
-
Investat(14) 14%x 3112:280,000
&000,000 x
Fsomoption 8,000,000 x 4%. x 3112, 80,000

Inkedged 160,000 14%x3112:5600

x

Premium (8,000,000 x 0.25%x 3112) (5,000)

Net intoincome.
36600
360,600
12:1,442400:17.6765%
x
3 8,160,000