Forward points= spot rate + Iq - Ib /100 * D/365

__________________________

1+ Ib /100 * D/365

Iq = Interest rate in quote currency, Ib = Interest rate in base currency

D= Actual number of days between spot and forward rate.

If the forward points are positive, it is added along with spot rate, otherwise it is subtracted
from the spot rate. In a direct quote, the home currency is the quote currency while the
foreign currency is the base currency.

1. If the spot rate is INR 68.30/USD, the interest rates in India and the U.S are 5% and
2% respectively, what is the forward rate for 30 days/one month?
2. Calculate the outright rate for the following data-

Spot – INR/USD- 68.8560/68.8562

April- 2/3
May- 5/7
June-11/15
July- 19/25
3. Convert the following rates into outright rates and indicate their spreads-

Currency Spot 1M 3M 6M
INR/USD 66.6300/25 20/25 25/35 30/40
INR/GBP 100.2000/35 30/32 50/35 55/42
INR/CAD 23.9000/30 30/25 40/60 45/65

4. A bank purchases a 100000 USD demand export bill drawn by an Indian exporter on
an American customer. Transit period is 15 days. The inter bank spot buying rate is
66.75/USD. One month forward buying rate is at a premium of 10 paise. Exchange
margin is 0.125%. Calculate the buying rate for the bank.

5. An exporter wants the bank to buy a 30 day bill drawn on a British firm for 50,000
GBP. Exchange margin is 0.15%. Transit period is 10 days. Spot rate is 100/GBP. One
month forward discount is 20 paise and two month is 50p. Calculate the buying rate
for the bank.