Strategic financial management
This query is : Resolved
22 July 2013
I am CA Finalist student preparing for my coming exam and I am referring to SD Bala and Makkar sir notes. However there are not all questions answered in makkar sir notes. I searched for the answer in suggested and other books available. It would be very kind if you would help me. I have also written my answer but I don't think it is correct.
Question no. 71 Page G19 of Makkar An Indian Company obtains the following quotes ( Rs. / $) Spot 35.90 / 36.10 3 month forward 36.00 / 36.25 6 month forward 36.10 / 36.40 3 months interest rates - Rs - 12 % / $ - 6 % 6 months interest rates - Rs. 11.5 % . $ - 5.5 % Determine what should be 3-months interest rates after 3 months to make the compant indifferent between three-month borrowing and six-month borrowing in the case of (a) Rupee Borrowing (b) Dollor Borrowing
Answer:
Forward rate of 3 months - 36.10 x (1+0.12x3/12) / ( 1 + 0.06 x 3/12 ) = 36.64 To be indifferent , forward rate of 3 months and 6 months should be equal so 36.64 = 36.10 x (1 + Rs. interest rate /2 ) / (1 + 0.055 /2 ) Therefore, Rs. interest rate = 8.63 %
Question no. 71 Page G19 of Makkar An Indian Company obtains the following quotes ( Rs. / $) Spot 35.90 / 36.10 3 month forward 36.00 / 36.25 6 month forward 36.10 / 36.40 3 months interest rates - Rs - 12 % / $ - 6 % 6 months interest rates - Rs. 11.5 % . $ - 5.5 % Determine what should be 3-months interest rates after 3 months to make the compant indifferent between three-month borrowing and six-month borrowing in the case of (a) Rupee Borrowing (b) Dollor Borrowing
Answer:
Forward rate of 3 months - 36.10 x (1+0.12x3/12) / ( 1 + 0.06 x 3/12 ) = 36.64 To be indifferent , forward rate of 3 months and 6 months should be equal so 36.64 = 36.10 x (1 + Rs. interest rate /2 ) / (1 + 0.055 /2 ) Therefore, Rs. interest rate = 8.63 %
29 September 2013
Answer was found in books of Makkar new ( printed version )
(1+.12/4)(1+i/4) = (1 + 0.115/2)
i = 10.68 %
Similarly for $,
(1+.055/2) = ( 1 + 0.06/4) ( 1+i/4)
i = 4.93 %
(1+.12/4)(1+i/4) = (1 + 0.115/2)
i = 10.68 %
Similarly for $,
(1+.055/2) = ( 1 + 0.06/4) ( 1+i/4)
i = 4.93 %
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- CAPITAL GAIN REDEVELOPED FLAT
- Multiple payment of self assessment tax for A Y 2025-2026
- Requirement under FEMA &RBI
- REGARDING ITR FILING QUESTION
- CLOSING STOCK QUERY
- DUE DATE FOR ITR FILING
- Computation of Dividend
- Gst reverse charge mechanism to be claimed in the month of payment
- ITR 44AD SECTION
- Query regarding Item 61/62/63 vs Item 64 in ITR-3
- GST REGISTRATION REQUIRED TO DIAGNOSTIC UNIT
- Concept of Vendor and customner reconciliation
- Mistake in e-invoice identified after 24 hours
- EXPORT PAYMENT
- NRI ITR2 account in 2025-26.
- Query regarding reporting of exempt foreign remuneration in ITR (AY 2026-27)
- FEMA/RBI treatment — Amazon.ca arbitrage (US buy, Canada sell, goods never enter India)
- Goods return by customer
- INWARD REMITTANCE FOREIGN
- CPC and SAC
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
