(a) During the audit of the Weak Bank (W), RBI has suggested that the Bank should...

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(a) During the audit of the Weak Bank (W), RBI has suggested that the Bank should either merge with another bank or may close down. Strong Bank (S) has submitted a proposal of merger of Weak Bank with itself. The relevant information and Balance Sheets of both the companies are as under: Particulars Gross NPA (%) Capital Adequacy Ratio (CAR) Total Capital/ Risk Weight Asset Weak Bank (W) Strong Bank (S) 56 40 5 16 Assigned Weights (%) 30 28 Market price per Share (MPS) Book value 12 96 200 32 10 Trading on Stock Exchange Irregular Frequent Balance Sheet (Rs. in Lakhs) Particulars Weak Bank (W) Strong Bank (S) Paid up Share Capital (Rs. 10 per share) 150 500 Reserves & Surplus 80 5,500 Deposits 4,000 44,000 Other Liabilities Total Liabilities 890 2,500 5,120 52,500 Cash in Hand & with RBI 400 2,500 Balance with Other Banks 2,000 Investments 1,100 19,000 Advances 3,500 27,000 Other Assets 70 2,000 Preliminary Expenses 50 Total Assets 5,120 52,500 You are required to (i) Calculate Swap ratio based on the above weights: (ii) Ascertain the number of Shares to be issued to Weak Bank; (iii) Prepare Balance Sheet after merger; and (iv) Calculate CAR and Gross NPA of Strong Bank after merger. (8 Marks) (b) Mercy is a Forex Dealer with XYZ Bank. She notices following information relating to Canadian Dollar (CAD) and German Deutschmark (DEM): Exchange rate - CAD 0.775 per DEM (Spot) CAD 0.780 per DEM (3 months) Interest rates DEM 7% p.a. CAD 9% p.a. (i) Assuming that there is no transaction cost determine does the Interest Rate Parity holds in above quotations. (ii) If yes, then explain the steps that would be required to make an arbitrage profit if Mercy is authorized to work with CAD 1 Million for the same purpose. Also determine the profit that would be made in CAD. Note: Ignore the decimal points in the amounts. (c) Mention the various techniques used in economic analysis. (8 Marks) (4 Marks) (a) During the audit of the Weak Bank (W), RBI has suggested that the Bank should either merge with another bank or may close down. Strong Bank (S) has submitted a proposal of merger of Weak Bank with itself. The relevant information and Balance Sheets of both the companies are as under: Particulars Gross NPA (%) Capital Adequacy Ratio (CAR) Total Capital/ Risk Weight Asset Weak Bank (W) Strong Bank (S) 56 40 5 16 Assigned Weights (%) 30 28 Market price per Share (MPS) Book value 12 96 200 32 10 Trading on Stock Exchange Irregular Frequent Balance Sheet (Rs. in Lakhs) Particulars Weak Bank (W) Strong Bank (S) Paid up Share Capital (Rs. 10 per share) 150 500 Reserves & Surplus 80 5,500 Deposits 4,000 44,000 Other Liabilities Total Liabilities 890 2,500 5,120 52,500 Cash in Hand & with RBI 400 2,500 Balance with Other Banks 2,000 Investments 1,100 19,000 Advances 3,500 27,000 Other Assets 70 2,000 Preliminary Expenses 50 Total Assets 5,120 52,500 You are required to (i) Calculate Swap ratio based on the above weights: (ii) Ascertain the number of Shares to be issued to Weak Bank; (iii) Prepare Balance Sheet after merger; and (iv) Calculate CAR and Gross NPA of Strong Bank after merger. (8 Marks) (b) Mercy is a Forex Dealer with XYZ Bank. She notices following information relating to Canadian Dollar (CAD) and German Deutschmark (DEM): Exchange rate - CAD 0.775 per DEM (Spot) CAD 0.780 per DEM (3 months) Interest rates DEM 7% p.a. CAD 9% p.a. (i) Assuming that there is no transaction cost determine does the Interest Rate Parity holds in above quotations. (ii) If yes, then explain the steps that would be required to make an arbitrage profit if Mercy is authorized to work with CAD 1 Million for the same purpose. Also determine the profit that would be made in CAD. Note: Ignore the decimal points in the amounts. (c) Mention the various techniques used in economic analysis. (8 Marks) (4 Marks)

Answer rating: 100% (QA)

a 1 Calculate Swap ratio based on the above weights Weak Bank W total capital 150 capital 80 reserves surplus 230 Lakhs Strong Bank S total capital 44... View the full answer