FOREIGN EXCHANGE ARITHMETIC

DIRECT A ND INDIRECT RATES SOLUTIONS

1 Identify the locations where the following quotations are 'Direct' and calculate the Indirect
form:
a. 1 GBP = SGD 2.8272 - 82 Singapore 0.3536 - 0.3537
b. CHF 1.2325 - 35 per USD Switzerland 0.8107-0.8114
c. INR 45.8335 - 65 = 1 USD India 2.1817-2.1818
d. 100 INR = JPY 198.2350 - 50 Japan 50.4426 - 50.4452
e. 1 AUD = EUR 0 6733 - 43 Euro - area 1.4830 - 1.4852

2) Identify the countries where the following quotations would be classified as Indirect' and convert
them to 'Direct' format:
a) 1EUR = CAD 1.4317-27 Euro - area 0.6980 - 0.6985
b) 100 INR = CHF 2.5858 -68 India 38.6578 - 38.6728
c) 1 AUD = SEK 4.9350-50 Australia 0.2022 - 0.2026
d) USD 0.1616-23 per SEK Sweden 6.1614-6.1881
e) USD 0.7000-10/SGD Singapore 1.4265 - 1.4286

3) Calculate the Reciprocal (Inverse) Quotes for the following:

a) USD / DKK 6.4270 - 70 DKK/USD 0.1554-0.1556
b) GBP/NZD 2.0397-07 NZD / GBP 0.4900 - 0.4903
c) USD / INR 44.3335 – 85 100INR / USD 2.2554 - 2.2556
d) EUR/AUD 1.5700- 10 AUD/EUR 0.6365 - 0.6369
e) EUR / SEK 7.0005 - 05 SEK/EUR 0.1426 - 0.1428
Exam Question
1. The Following Quote is given in New York
EUR 1= USD 1.2596-1.2620
a. Is it Direct or Indirect Quote?
b. Find the Inverse Quote?
2. The following quote is given by bank in Mumbai 1
USD = INR 67.7550-67.7575
a) State where the above Quote is Direct?
b) Calculate INR USD Quote
3. The Following Quote is given in Mumbai
a) 1 USD= INR 44.7250-00
b) USD/CAD= 6.4750-6.4860
Answer the following
i) Identify the country where the above quotes are direct?
ii) Calculate spread, Spread % and MID Rate for both the Quotes
iii) Calculate Reciprocal Quote for both the quotes.

82 | P a g e
4. The following Quote is given by bank in Mumbai:
1 USD = INR 67.7550-67.7575
 Is this Quote “Direct” or “Indirect” in Mumbai?
 Calculate Mid-Rate, Spread and Spread%
 Find the inverse Quote
CROSS RATE CALCULATIONS SOLUTIONS
1)USD = CHF 1.2325 - 35
1USD = CAD 1.1285 – 95
Calculate value of 1 CAD in terms of CHF CAD/CHF 1.0912 -1.0930
2) USD 1.6990 - 00 per GBP
EUR 1.2470-80 per GBP
Calculate USD per EUR quotation. EUR /USD 1.3614-1.3633
3)USD / INR 46.0485 - 35
USD /SEK 5.8525 -25
Calculate 100 INR / SEK quotation. 100 INR / SEK 12.7080 - 12.7311

4) 100 INR/USD 2.1585 - 90

USD/JPY 91.1525-25
Calculate 100 JPY / INR quotation. 100 JPY / INR 50.8079 - 50 8252

5) 100 INR /USD 2.1660-.65 100 JPY/INR 41.1550-50

Calculate USD / JPY quotation. USD/JPY 112.1278-112.1809

6) EUR 0.7135-45 per USD USD 1.6767 -77 per GBP

Calculate GBP per EUR quotation. EUR / GBP 0.8342 - 0.8359

7) AUD 1.1818-28/USD
SGD 1.4343-53/USD
Calculate AUD per SGD quotation. SGD / AUD 0.8234 - 0.8247

8) SEK 8.9975 - 75 = 1 GBP

GBP 0.6363 - 73 = 1 USD
Calculate value of 1 SEK in terms of USD. SEK/USD 0.1742-0.1747

9)USD / INR 46.6375 - 25

EUR/USD 1.2870-80
Calculate INR / EUR quotation. 100 INR / EUR 1.6646 - 1.6660

10) 1 USD = CAD 1.1303- 13

1 USD = INR 45.7350 - 00
Calculate value of 1 CAD in terms of INR. CAD / INR 40.4269 - 40.4671

83 | P a g e
 PERCENTAGE SPREAD CALCULATIONS . SOLUTIONS
1) 1 USD = CAD 1.1290 - 00 Calculate %age spread. % spread = 0.0885 %

2) 100 INR = USD 2.1605 - 10 Calculate %age spread. % spread = 0.0231 %

3) Mean rate GBP / INR 78.6500 AND SPREAD = 0.0030 % spread = 0.0038 %
Calculate %age spread and GBP / INR quotation. GBP/INR 78.6485 - 78.6515

4) Flat rate USD / AUD 1.1785 and spread = 10 points % spread = 0.0849 %
Calculate %age spread and USD / AUD quotation. USD /AUD 1.1780- 1.1790

5) Average rate EUR / SEK 8.0025 and spread = 80 points % spread = 0.1000%
Calculate %age spread and EUR / SEK quotation. EUR / SEK 7.9985 - 8.0065

7) Bid rate EUR / CHF 1,6873 and spread = 0.0014 EUR /CHF 1.6873 – 1.6887
Calculate EUR / CHF quotation and %age spread. % spread = 0.0829 %

8) Mid rate USD /EUR 0.7108

Percentage spread = 0.0520% spread = 0.0004
Calculate spread and USD / EUR quotation. USD / EUR 0.7106 – 0.7110

9) Spread = 0.0014 and % spread = 0.0810% Mid rate = 1.7284

Calculate mid rate and the USD / CHF quotation. USD /CHF 1.7277- 1.7291

IDENTIFY AND CALCULATE

GEOGRAPHICAL ARBITRAGE SOLUTONS
1) 1 USD = CAD 1.1293-03
1 USD = CAD 1.1275 - 85 USD 709 PER USD 1 MILLION

2) 1 GBP = CHF 2.4326 - 36

1 GBP = CHF 2.4345 - 55 GBP 370 PER GBP 1 MILLION

3) USD 1.2448 - 58 per EUR

EUR 0.8050 - 60 per USD EUR 2064 PER EUR 1 MILLION

4) GBP / SEK 8.9950 - 50

SEK/GBP 0.1090 - 00 SEK 9540 PER SEK 1 MILLION

5) 100 INR/USD 2.1583-88

USD/INR 46.3375-25 USD 102 PER USD 1 MILLION

84 | P a g e
6) 100 JPY/INR 40.2450-50
100 INR / JPY 248.4850 – 50 INR 28 PER INR 1 MILLION

7) CAD / INR 32.7850 - 00

100 INR/CAD 3.0425-50 INR 1547 PER INR 1 MILLION

8) EUR/AUD 1.5998 - 08
AUD /EUR 0.6223 -33 AUD 2226 PER AUD 1 MILUON

9) SGD 1.8737 -47 per EUR

EUR 0.5355 - 65 per SGD EUR 3366 PER EUR 1 MILLION

10) CHF 2.4189 -99 / GBP

GBP 0.4110- 17/CHF GBP 3741 PER GBP 1 MILLION
IDENTIFY A ND CALCULATE TRIANGULAR
ARBITRAGE SOLUTIONS
1) GBP/USD 1.6985
USD/AUD 1.1875
GBP/AUD 2.0195 GBP 1255 PER GBP 1 MILLION

2)EUR/USD 1.2398
USD/-CHF 1.2298
CHF/EUR 0.6598 CHF 6001 PER CHF 1 MILLION

3)USD / SEK 5.9935

GBP/SEK 9.8735
GBP/USD 1.6435 GBP 2354 PER GBP 1 MILLION

4 EUR/SGD 1.9578
EUR/CHF 1.6478
CHF/SGD 11878 CHF 278 PER CHF 1 MILLION

5)USD/JPY 91.2450
USD / INR 45.2450
100 JPY / INR 49.2450 JPY 6930 PER JPY 1 MILLION

6) A Bank in London quotes: GBP / SGD 2.6783 - 95 and

a Bank in Singapore quotes: USD / SGD 1.4318 - 28
then what should be the derived GBP / USD quote?

85 | P a g e
If a Bank in New York quotes GBP / USD 1.8668 - 78
then establish arbitrage ,if any, assuming capital
GBP 1 million. GBP 791

7) Trader A ' in Zurich quotes: CHF 1.2298 - 08 per

USD and Trader 'B' in Frankfurt qoutes: CHF .
1.5690 - 00 per EUR What should be the derived value
of USD per EUR? If trader 'C' in London quotes:
USD 1.2780 - 90 per EUR then calculate the
triangular arbitrage, if any, on assumed capital of
EUR 1 million. EUR 1073

8)CAD 1.8900- 10/GBP

CAD 1.1245-55/USD
GBP 0.5930 -35 / USD GBP 1953 PER GBP 1 MILLION

9)100 INR/USD 2.1695-00

USD/JPY 90.8500 - 00
100 JPY/INR 50.7425 - 75 JPY 130 PER JPY 1 MILLION

10)GBP/INR 74.8525 -75

USD / GBP 0.5625 - 30
100 INR/USD 2.3715-20 INR 326 PER INR 1 MILLION

11)EUR/AUD 1.4892-02
EUR/USD 1.2390 - 00
USD /AUD 1.1990-00 USD 806 PER USD 1 MILLION

12)SEK 8.0050 - 00 = 1 EUR

SGD 1.7130-40 = 1 EUR
SEK 4.6775 - 25 = 1 SGD SEK 319 PER SEK 1 MILLION

13)1 USD = CAD 1.1285 - 95

1 USD = AUD 1.1428-38
1 AUD = CAD 0.9905 – 15 AUD 2163 PER AUD 1 MILLION

14)100 INR/USD 2.1585-90

100 JPY/USD 1.0990-00
100 INR/JPY 196.2375-75 NO ARBITRAGE

86 | P a g e
15) EUR/CHF 1,6197-07
EUR/SGD 1.9197-07
SGD / CHF 0.8397 – 07 SGD 3076 PER SGD 1
MILLION
FOREIGN EXCHANGE ARITHMETIC (II)
FORWARD RATES CALCULATIONS
(FORMULA METHOD) SOLUTIONS
1) Spot GBP/USD 1.6835
USD interest rate: 3.25 % p.a.
GBP interest rate: 3.65 % p.a.
Calculate 3 month forward GBP / USD rate. 3 MONTHS RATE = 1.6818

2) 73 days forward USD / CAD 1.1363

CAD interest rate: 3.6250 % p.a.
USD interest rate; 2.8750 % p.a.
Calculate spot USD / CAD rate. SPOT RATE = 1.1346.

3) Spot EUR / SGD 1.9382

60 days forward rate: 1.9402
EUR interest rate; 2.25 % p.a.
Calculate SGD interest rate. SGD INTEREST RATE = 2.8715%p.a.

4) Spot EUR/CHF 1.4982

219 days forward rate: 1.4918
CHF interest rate: 1.35 % p.a.
Calculate EUR interest rate. EUR INTEREST RATE = 2.0708%p.a.

5) 120 days forward 100 INR / USD 2.1695

V l MILLION
INR interest rate: 4.25 % p.a.
USD interest rate: 2.65 % p.a.
Calculate spot USD / INR rate. SPOT RATE = 45.8512

6) Spot GBP/SEK 9.8835

6 months forward rate: 10.0085
GBP interest rate: 3.1250 % p.a.
Calculate SEK interest rate. SEK INTEREST RATE = 5.6940%p.a

87 | P a g e
7) 4 months forward USD / INR rate 46.0035
includes premium on USD 1165 points
USD interest rate: 2.5 % p.a.
Calculate INR interest rate. INR INTEREST RATE = 3.2680%p.a

8) Spot USD/JPY 91.2200

JPY Interest rate: 0.35 %p.a
USD Interest rate: 2.65 %p.a
Calculate 292 days forward USD / JPY rate. 292 DAYS RATE = 89.5764

9) Spot 100 INR/USD 2.2404

INR Interest rate: 3.75 %p.a
USD Interest rate: 2.25 %p.a
Calculate 90 days forward USD / INR rate. 90 DAYS RATE = 44.8013

10) Spot 100 INR/JPY 242.35

INR Interest rate: 3.50%p.a
JPY Interest rate: 0.25%p.a
Calculate 6 month forward 100 JPY / INR rate. 6 MONTH RATE = 41.9323

CALCULATION OF SWAP POINTS SOLUTIONS

1) Spot EUR/CHF 1.5735-1.5745

EUR Interest rates: 2.25 - 2.50 %p.a
CHF Interest rates: 1.00 -1.25 %p.a 6 MONTHS QUOTE = 1.5618-1.5667
Calculate 6 month forward quotation and Swap points. SWAP POINTS = 117-78

2) Spot USD/INR 44.8350-00

USD Interest rates: 2.35 - 2.60 %p.a
INR Interest rates: 4.00 - 4.25 %p.a 3 MONTHSQUOTE = 44.9909-45.0517
Calculate 3 Months forward quotation and Swap points. SWAP POINTS = 1559-2117

3) Spot GBP/AUD 1.8755 - 65

C iBP Interest rates: 3.20 - 3.45 %p.a
AUD Interest rates: 2.65 - 2.90 %p.a 60 DAYS QUOTE = 1.8730 -1.8756
Calculate 60 days forward quotation and Swap points. SWAP POINTS = 2 5 -9

4) Spot USD / CAD 1.1098 - 08

88 | P a g e
USD Interest rates: 2.50 - 2.75 %p.a
CAD Interest rates: 3.1250 - 3.3750 %p.a 146 DAYS QUOTE = 1.1114 -1.1146
( "alculate 146 days forward quotation and Swap points. SWAP POINTS = 16-38

5) Spot USD/CAD 1.1285-95

CAD interest rates: 4.00 - 4.25 % p.a.
USD interest rates: 3.00 - 3.25 % p.a. 3 MONTHS QUOTE = 1.1306 -1.1330
Calculate 3 month forward Swap Points SWAP POINTS = 21-35

6) Spot GBP / CHF 2.4460 - 70

GBP interest rates: 3.25 - 3.50 % p.a.
CHF interest rates: 1.50 - 1.75 % p.a. 60 DAYS QUOTE = 2.4379 - 2.4409
Calculate 60 days forward Swap Points. SWAP POINTS = 81-61

7) Spot GBP / INR 78 3525 - 75

3 Months forward 78 4980 - 78.6005
INR Deposit Interest rate: 4.00 %p.a
GBP Deposit Interest rate: 3.00 %p.a GBP LENDING RATE = 3.25%PA
Calculate the arbitrage free Lending rates for
GBP and INR INR LENDING RATE = 4.25%PA
8) Spot USD / CHF 1.2360 - 70
73 days forward 1.2325 - 1.2345
USD Lending Interest rate: 2.50 %p.a
CHF Lending Interest rate: 1.25 %p.a USD DEPOSIT RATE = 2.2650%PA
Calculate the arbitrage free Deposit rates for USD and CHF CHF DEPOSIT RATE = 1.0770%PA

9) Spot USD/AUD 1.1885 - 95

6 months forward Swap Points 15 - 44
AUD Deposit interest rate: 3.00 % p.a.
USD Deposit interest rate: 2.50 % p.a. AUD LENDING RATE = 3.25%PA
Calculate the arbitrage free lending interest rates
for AUD and USD. USD LENDING RATE = 2.75%PA
10) Spot GBP / SEK 9.0335 - 9.0385
4 months forward Swap Points 74 -224
SEK Lending interest rate: 3.75% p.a
GBP Lending interest rate: 3.25%p.a SEK DEPOSIT RATE = 3.50%PA
Calculate the arbitrage free deposit interest rates
for SEK and GBR GBP DEPOSIT RATE = 3.00%RA

89 | P a g e
ANNUALISED FORWARD MARGIN (AFM)
1) Spot USD / SEK 5.9715
3 month forward rate: 6,0085
Calculate 3 month AFM. AFM = 2.4784%

2) Spot USD /INR 45.3820

b month AFM: ( + )2 .2 5%
Calculate 6 month forward USD / INR rate. 6 MONTH RATE = 45.8925

3) Spot USD/CHF 1.2408

146 days AFM: Discount 1 %
Calculate 146 days forward USD / CHF rate. 146 DAYS RATE = 1.2358

4) 60 days forward GBP / SGD 2.8038

60 days AFM: (-) 1.25 %
Calculate spot GBP / SGD rate. SPOT RATE = 2.8097

5) 3 month forward USD / CAD 1.1383

3 month AFM: Premium 1.5 %
Calculate spot USD / CAD rate. SPOT RATE = 1.1340

6) Spot EUR/JPY 119.3525

1 month forward rate: 118.9745
Calculate 1 month AFM. AFM = DISCOUNT 3.8005%
If JPY interest rate=0.25 % p.a. EUR INTEREST RATE = 4.0505%p.a.

90 | P a g e
calculate EUR interest rate.

7) Spot GBP/EUR 1.2118

3 month forward rate: 1.2118 AFM = ZERO
Calculate 3 month AFM and interpret the result. INT RATE OF GBP = INT RATE OF EUR

8) Spot EUR/AUD 1.3932

3 month AFM: Premium 1.75 %
Calculate 3 month forward EUR / AUD rate. 3 MONTH RATE = 1.3993
If AUD interest rate = 3.25 % p.a. calculate
EUR interest rate. EUR INTEREST RATE = 1.5%p.a.

9) Spot USD / JPY 90.2500 - 91.2500

- 6 month forward rate: 89.1800 - 90 1800 AFM = ( - ) 2.3452%
Calculate 6 month AFM and interpret the result. USD INT RATE MORE BY 2.3452%

10) Spot USD/INR 45.3825-75

3 month forward 100 INR / USD 2.2002 - 2.2005 AFM = ( + ) 0.5545%
Calculate 3 month AFM and interpret the result. NR INT RATE MORE BY 0.5545%
If USD interest rate = 2.35 % p.a. calculate INR
interest rate. INR INTEREST RATE = 2.9045%p.a

COVERED INTEREST ARBITRAGE SOLUTIONS

1) Spot USD/CAD 1.1315

6 month forward rate: 1.1410
USD interest rate:2 % p.a.
CAD interest rate: 3 % p.a. CAD 3480 PER CAD 1 MILLION

2) Spot EUR / SEK 8.0035

3 month forward Rate: 8.0515

SEK interest rate: 4.00 % p.a.

EUR interest rate: 2.40 % p.a. SEK 2033 PER SEK 1 MILLION

3) Spot GBP / AUD 2.0340

60 days forward rate: 2.0370
Annualised 60 days GBP interest rate: 2.40 %
Annualised 60 days AUD interest rate: 4.80 % GBP 2515 PER GBP 1 MILLION

91 | P a g e
4) Spot EUR/SGD 1.7148
73 days forward rate: 1.7173
EUR interest rate: 2.50 % p.a.
SGD interest rate: 3.50 % p.a. EUR 534 PER EUR 1 MILLION

5) Spot USD/CHF 1.2318

120 days forward rate: 1.2245
USD interest rate: 2.70 % p.a.
CHF interest rate: 1.50 % p.a. USD 1991 PER USD 1 MILLION

6) Spot SEK/GBP 0.1012

146 days forward rate: 0.0965
GBP interest rate: 2.50 % p.a.
SEK interest rate: 5.00 % p.a. SEK 39192 PER SEK 1 MILLION

7) Spot 100 INR/USD 2.1815

6 month forward rate: 2.1778
Annualised INR interest rate: 4.20 %.
Annualised USD interest rate: 2.40 %. USD 7268 PER USD 1 MILLION

8) Spot USD / EUR 0.8013

219 days forward rate: 0.7968
USD interest rate: 2.50 % p.a.
EUR interest rate: 2.00 % p.a. USD 2715 PER USD 1 MILLION
BORROWING AND INVESTMENT DECISIONS
1) Given the following options establish which currency would be used to borrow
6 million INR for a temperory period of 3 months.
INR Interest rate: 5 %p.a
Currency: Spot rate: Interest rate: 3 month fwd rate:
USD 44.7535 2.25 %p.a 45.0600
GBP 78.7275 3.50 %p.a 79.0200 CURRENCY = GBP
CHF 38.3525 1.50 %p.a 38.7000 COST = INR 74987

92 | P a g e
2) Given the following options establish which currency would be used to invest
INR 8 million for a temperory period of 6 months.
INR Interest rate: 5 %p.a
Currency: Spot rate: Interest rate: 6 month fwd rate:
USD 44.7535 2.25 %p.a 45.3700
GBP 78.7275 3.50 %p.a 79.3100 CURRENCY = USD
CHF 38.3525 1.50 %p.a 39.0200 RETURN = INR 201443

3) Given the following options establish which currency would be used to borrow
INR 12 million for a temperory period of 3 months.
INR Interest rate: 4 %p.a
Currency Spot rate: Interest rate: 3 month fwd rate:
USD 44.7535 – 65 2.25 %p.a 44.9450 - 00
GBP 78.7275 - 25 3.50 %p.a 78.8250 – 00 CURRENCY = CHF
CHF 38.3525-75 1.50 %p.a 38.5850 -00 COST = 119589

4) Given the following options establish which currency would be used to invest
INR 8 million for a temperory period of 6 months.
INR Interest rate: 4 %p.a
Interest rate
Currency: Spot rate: Interest rate: 60 days fwd rate:
USD 44.7535 -85 2.25% 44.1500 -50
GBP 78.7275 – 00 3.50% 78.9400 – 50 CURRENCY = CHF
CHF 38.3525 – 55 1.50% 38.8375 – 25 RETURN = INR 161287

5) Given the following options establish which currency would be used to borrow
INR 12 million for a temperory period of 60 days.
INR Interest rate: 4.00 - 4.25 %p.a
Currency: Spot rate: Interest rate: 60 days fwd rate:
USD 44.7535 – 65 2.25 - 2.50 %p.a 44.8750 - 00
GBP 78.7275 – 25 3.50 - 3.75 %p.a 78.7950 – 00 CURRENCY = USD
CHF 38.3525 – 75 1.50-1.75 %p.a 38.5050 - 00 COST = INR 84060

6) Given the following options establish which currency would be used to invest
INR 8 million for a temperory period of 90 days.
INR Interest rate: 4.00 - 4.25 %p.a
Currency: Spot rate: Interest rate: 90 days fwd rate:
USD 44.7535 – 85 2.00 -2.25 %p.a 44.9800 - 50
GBP 78.7275 – 00 3.25 -3.50 %p.a 78.8700 - 50 CURRENCY = INR
CHF 38.3525 – 55 1.50-1.75 %p.a 38.5900 - 50 RETURN = INR 80000

93 | P a g e
 Forward Rate Calculation Table Method

Q1: 1USD = CAD 1.0187/07 is the spot rate.

1-month forward point are 30/50- and 2-month forward point are 54/68.
Calculate outright forward rate for 50 days and find 1 month and 2-month forward quotes.

Q2: Spot EUR/CHF rate is 1.5279.

9-month forward rate: EUR/CHF is 1.6221. Find Annualized Forward premium/discount.

Q3: Following quotes are available in Mumbai: USD/INR (spot) 57.7012/57.7216

30-month forward points are 300/380
1. Write the 3 month outright forward rate.
2. Calculate annualized forward premium/discount on the 3-month forward rate.
3. What can be the likely quote for 58 days forward contract?

Q4: Following are the USD INR quotes by a banker at Mumbai:

Spot: 47.6420/80
3 months forward :60/100
Calculate annualized forward premium/discount.

Q5: From the following USD INR quotations, calculate the likely quotations for
a) 1 month 20 days forward and
b) 4 month 10 days forward
Spot 47.7590/980
1-month 110/210
3-month 250/400
6-month 700/890

Q6: Following is the GBP/USD spot rate:1.2192/1.2290 1-month forward points are:100/150
3-month forward points are:300/500 6-month forward point are: 500/800
Calculate 1,3 and 6 months outright forward quote. Also find 45 days forward quote.

Q7: 1 GBP= 1.6220/1.6250 spot

1-month forward 80/60 2-month forward 120/90
Calculate swap points and outright forward rate for.
a) 21 days b) 1 month and 10 days.

94 | P a g e