As part of a summer internship at GlobalBank, you’ve been seconded to the foreign exchange
floor. In your internship, you’ve been asked to manage foreign currency payments for a large
supermarket based in the United Kingdom.
You have the following information available to you:
Currency pair Mid-market spot rates
GBP/EUR 1.1908
GBP/USD 1.3109
EUR/SEK 10.3894
EUR/USD 1.1009
AUD/USD 0.7253
USD/CHF 0.9419
Interest rate on
deposit
United Kingdom 4.5%
United States 2.2%
Eurozone 5.0%
Sweden 6.8%
Japan 1.2%
Switzerland 7.0%
REQUIRED:
Q1.1 Discuss at least four reasons a large UK supermarket may require access to foreign
currency market.
Maximum word limit: 250
(15%)
Q1.2 The supermarket has the need The UK supermarket chain are evaluating whether they should make the $100m
payment immediately or wait until one year from now? Using an appropriate approach,
demonstrate which of the two options will lead to a better outcome for the supermarket.
(15%)
Q1.5 The supermarket is wishing to take over a Swiss supermarket chain called
SupermarktSchweiz A.G. The Swiss supermarket shares are currently trading at 25 CHF
each and the company has 20 million shares outstanding. To acquire the Swiss company,
the UK supermarket chain plans to pay 15% above the market value for the company, what
would be the cost to them today in their home currency?
(12%)
(Q
- Question 1 As Part Of A Summer Internship At Globalbank You Ve Been Seconded To The Foreign Exchange Floor In Your 1 (180.23 KiB) Viewed 45 times
the value of this transaction in GBP (assuming no transaction costs).
(5%)
Q1.3 Your supermarket client has asked for the above quote used for Q1.2. to be provided
in the form of ‘USD/GBP’, demonstrate how you would obtain an appropriate quote?
(
You must answer TWO questions from the choice of four, using a separate document for each question (the weighting is noted against the question). Once you have reached the word limit, anything you write will not be marked. QUESTION 1 As part of a summer internship at GlobalBank, you've been seconded to the foreign exchange floor. In your internship, you've been asked to manage foreign currency payments for a large supermarket based in the United Kingdom. You have the following information available to you: Currency pair GBP/EUR GBP/USD EUR/SEK EUR/USD AUD/USD USD/CHF Mid-market spot rates 1.1908 1.3109 10.3894 1.1009 0.7253 0.9419 United Kingdom United States Eurozone Sweden Japan Switzerland Interest rate on deposit 4.5% 2.2% 5.0% 6.8% 1.2% 7.0% REQUIRED: Q1.1 Discuss at least four reasons a large UK supermarket may require access to foreign currency market. Maximum word limit: 250 (15%) Q1.2 The supermarket has the need to convert $100m today to make a payment. Calculate the value of this transaction in GBP (assuming no transaction costs). (5%) Q1.3 Your supermarket client has asked for the above quote used for Q1.2. to be provided in the form of 'USD/GBP', demonstrate how you would obtain an appropriate quote? (3%) 4 Continued Overleaf Q1.4 The UK supermarket chain are evaluating whether they should make the $100m payment immediately or wait until one year from now? Using an appropriate approach, demonstrate which of the two options will lead to a better outcome for the supermarket. (15%) Q1.5 The supermarket is wishing to take over a Swiss supermarket chain called SupermarktSchweiz A.G. The Swiss supermarket shares are currently trading at 25 CHF each and the company has 20 million shares outstanding. To acquire the Swiss company, the UK supermarket chain plans to pay 15% above the market value for the company, what would be the cost to them today in their home currency? (12%)