1 $ = 40.11 INR
1 year forward rate, 1 $ = 43.52 INR
Inflation rate in India = 8.5 %
Inflation rate in US ?
Please Help.
Thanks in Advance.
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Urgent -- sfm-forex
Replies (6)
Inflation rate in US = 0 using the Inflation Rate Parity Theory Equation.
As per Inflation rate parity Fwd. Rate = Spot Rate (1+inflation rate of price currency)/(1+inflation rate of base curreny)
So, 43.52 =40.11(1.085)/(1+x)
1+X = 43.52/43.52
1+x =1
x = 0%
ya... even i got the same answer !?
but.. i thot inflation rate cant be zero ?? can it be ??
Yes it can be. Inflation rate can even be negative and then we call it 'Deflation' in Economics.
Yes Bank is seeking fixed rate funding.It is able to finance at a cost of six months LIBOR + 0.25% for Rs.2 crores for 5 Years. The bank is able to swap into a fixed rate at 7.5% versus six month LIBOR treating six months as exactly half a year.
(a) What will be the "all in cost" funds to Yes Bank?
(b) Another possibility being considered is the issue of a hybrid instrument which pays 7.5% for 1st three years and LIBOR-0.25% for remaining 2 years.
Given a 3 year swap rate of 8%, suggest the method by which the bank should achieve fixed rate funding.
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