INTF: Assignment # 1

Puneet Agarwal – EPGP – Roll No: 1914002

1) USD/INR is 71. What does it mean?

Ans: The price of 1 US Dollar is 71.0000 Indian Rupees. This is spot price.

2) Using the data in #1 What is INR/USD

Ans: INR/USD = 1/71 = 0.0140

3) Last year USD/INR was 72. Does this suggest that the rupee has strengthened or weakened?

Ans: Rupee has strengthened

4) If you are exporter is this good or bad for your business? Explain with a simple example.

Ans: It is bad for my business. IT services company which gets its revenues in dollars pays the same
salary to its employees in INR but is now getting lesser rupee equivalent revenue for the same work
done.

5) Co. X, a large Delhi-based Co., borrowed $10 million in Dollars from a US-based bank at an interest
of 4% last year. The spot rate INR/USD at the time they borrowed the money was 0.0154. Today, the
INR/USD spot rate is 0.0161. Is this good or bad for the company?

Ans: The rupee has appreciated. Since the interest need to be paid in dollars, the rupee equivalent of
interest is lesser now. Hence it is good for company X.

6) USD/INR changed from 69 to 71 in one year. Calculate the rate of change in the value of INR. Does
this change increase or decrease India’s cost for importing oil.

Ans: Rate of rupee depreciation = (69/71 – 1)*100 = -2.816%. This change increases the cost of
importing oil because India is a net importer of the crude oil.

7) USD/INR is 70 ; GBP/INR is 80. Calculate GBP/USD

Ans: GBP/USD = (GBP/INR)/(USD/INR) = 80/70 = 1.1428

8) GBP/EUR is 1.1352, EUR/USD is 1.2347, USD/INR IS 71.2132. What is INR/GBP ?

Ans: GBP/USD = 1.1352*1.2347=1.4016 ; GBP/INR = 1.4016*71.2132=99.81 ; INR/GBP = 1/99.81 =

0.0100

9) INR/USD changed from 0.0154 TO 0.0148. How many pips is that? Has the INR gone up or down?
What about the dollar?

Ans: Change is 6 pips. INR has gone down and Dollar has gone up.

10) The bank gives you the following rates for USD/INR 70.2145 and 71. What are these two rates and
what would it cost you (in INR) to buy $ 100

Ans: If I want to buy dollar then I will have to pay 71 rupees (ask price) and if I want to sell dollars
then I will get 70.2145 rupees (bid price). I will have to pay Rs 7,100 to buy $100.