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QUESTION 1
Astro Imports enters into a swap agreement with Global Market Bank to exchange
USD 14 million for ZAR and to buy back the USD for ZAR after 95 days. The agreed
benchmark rate is USD/ZAR 14.86. The forward rate that are agreed upon is stated as
R 15.31.
This implies that Astro Imports will buy USD 14 million spot at the benchmark rate of R
14.86 and then sell it back to Global Market Bank at their offer rate of R 15.31
Question 1.1
Indicate the cash flows of the transactions at the swap deal date and at 95 days for
both parties, as well as the net cash flow for each of them. (5)
Question 1.2
Calculate the spread in percentage terms of the quotation USD/ZAR 14/6234/14.6854.(2)
Question 1.3
Discuss the consequences of depreciation of the ZAR on imported and exported
consumer goods and the long term impact on an economy like South Africa (3)
[10]
QUESTION 2
You have to prepare a TB tender on behalf of your bank’s treasury department. The
following information is supplied to you:
• Yield required on 91-day bills: 6,5 per cent
• Amount to tender: R50 million
Question 2.1
Calculate the discount rate and the actual tender price that will be submitted. (3)
Question 2.2
Calculate the consideration payable by your bank if the tender is accepted.
LFPA5800 ASSIGNMENT 2016
2
QUESTION 1
Astro Imports enters into a swap agreement with Global Market Bank to exchange
USD 14 million for ZAR and to buy back the USD for ZAR after 95 days. The agreed
benchmark rate is USD/ZAR 14.86. The forward rate that are agreed upon is stated as
R 15.31.
This implies that Astro Imports will buy USD 14 million spot at the benchmark rate of R
14.86 and then sell it back to Global Market Bank at their offer rate of R 15.31
Question 1.1
Indicate the cash flows of the transactions at the swap deal date and at 95 days for
both parties, as well as the net cash flow for each of them. (5)
Question 1.2
Calculate the spread in percentage terms of the quotation USD/ZAR 14/6234/14.6854.(2)
Question 1.3
Discuss the consequences of depreciation of the ZAR on imported and exported
consumer goods and the long term impact on an economy like South Africa (3)
[10]
QUESTION 2
You have to prepare a TB tender on behalf of your bank’s treasury department. The
following information is supplied to you:
• Yield required on 91-day bills: 6,5 per cent
• Amount to tender: R50 million
Question 2.1
Calculate the discount rate and the actual tender price that will be submitted. (3)
Question 2.2
Calculate the consideration payable by your bank if the tender is accepted. (2)
[5]
3
QUESTION 3
Fast Moving Bank (FMB) experiences a seven-day liquidity shortage of R400 million
that has to be funded by a repurchase transaction with the SARB. The following
information is supplied:
• SARB’s required haircut rate = 3,5%
• Repo rate = 5,5% p.a.
Question 3.1
Calculate the repurchase consideration for FMB. (2)
Question 3.2
Calculate the market value of collateral assets that FMB has to lodge with the SARB
for the next week. (1)
Question 3.3
Calculate the The adjusted market value of FMB’s collateral on day 3 if its current
market value has changed to R410 669 779 (2)
[5]
QUESTION 4
During the latter part of 2015 we have seen the ZAR slip to record low levels against
the USD. Write an article of approximately 2 pages regarding the reasons for this
decline as well as the long term impact on our economy. Also indicate if this situation
will remain or if it is possible that we can recover from this. [10]
[Total 30 MARKS]
4
During the latter part of 2015 we have seen the ZAR slip to record low levels against
the USD. Write an article of approximately 2 pages regarding the reasons for this
decline as well as the long term impact on our economy. Also indicate if this situation
will remain or if it is possible that we can recover from this. [10]
