Sample End Term Exam

Treasury Management (End Term Examination)

Prof Ramesh Laxman

Duration = 1.5 Hours

Instructions: Open book, Open Laptop, Soft Copy Submission in word or excel or word & excel, No Internet

1) Banks deal substantially in money and their balance sheet is also comprised of financial assets and liabilities. What are the key measurement ratios computed in the case of a bank to evaluate the performance of a bank. (5 Marks)

2) While funding short term liquidity shortages, what are the major sources banks tries to access and in what order would they prefer to access them. (5 Marks)

3) Why is a barbell portfolio is said to be more convex than a bullet portfolio for the same duration (5 Marks)

4) Given the following prices observed in the market on 23^rd December 2011, construct a participating forward for a six month maturity and write a term sheet for the customer both for export realization and import payments. (15 Marks)

a. USD / INR Spot = 52.96 / 62. 9675

b. 6M forward Points = 169.5 / 171.50

5) Given the following bond prices, construct a butterfly strategy for an amount of INR 40 million and indicate which bond you are shorting with the quantity you are shorting and the quantities of the bond you are buying. For a ten basis point increase and decrease in the yield curve, show the gain or loss in the portfolio (10 Marks)

Bond	Coupon	Maturity	Price (in INR)
8.07% 2017	8.07%	15th Jan 2017	98.20
8.08% 2022	8.08%	2nd Aug 2022	97.65
8.30% 2040	8.30%	2nd Jul 2040	95.80

6) From the following quotations available in the market quote fix for fix cross currency swap – you must quote fixed in both USD and INR with bid offer spreads. Tenure = 5 Years. Your margins 20 basis points over /under Inter-bank for interest rates and 0.0050 for currency rates. Indicate the notional principle in INR for the customer. (10 Marks)

Market / Quote	Rate Quoted Bid	Rate Quoted Offer
USD / INR Spot	47.7350	47.7450
5 Year MIFOR against 3 month MIFOR	6.1%	6.4%
USD IRS against 3 month LIBOR	2.896	2.936