The total deposit of the Islamic banks is OMR26.3 billion. Credit to the private sector rose by
Question:
The Omani oil price averaged $47.7 per barrel during the first eight months of 2020, which is lower by 26.3 per cent over the corresponding period of last year. Moreover, the average daily oil production decreased by 1.4 per cent to 957.3 thousand barrels during this period.
Based on the economic conditions, Islamic banks are required to keep 10 percent cash reserves against its deposits. The banks have a total deposit of OMR26.3 billion mentioned in the report. You are required to:(25 marks)
i. Calculate cash reserve and loans that the banks (5 marks).
ii. Discuss credit creation and cash reserve relating to the report (20 marks).
(C)If the spot rate is 9.50 AED per OMR. The annual interest rates are 12% in the UAE. If these interest rates remain constant, what is the market forecast of the spot rate for the OMR in two years?. You are required to:(25 marks)
i. Calculate market forecast of the spot rate for the OMR in two years (5 marks).
ii. Discuss interest rate risk of the report (20 marks).
(D)The Omani oil price averaged US$47.7 per barrel during the first eight months of 2020. And if an Omani Oil company is exporting oil on open account to an Malaysian company for US$100,000, payment to be made in 60 days. The current exchange rate is US$2.60 per OMR. The Omani company is expecting to exchange the 0.380 OMR per US$1 when the payment is made. You are required to:
i. Calculate transaction exposure when payment is received in OMR (5 marks).
ii. If the OMR weakens to 0.370 per US$1, then analyse how much the Omani Oil company will receive the payment (5 marks).
iii. If the OMR strengthens to 0.390 per US$1, then analyse how much the Omani Oil company will receive the payment (5 marks).
iv. Explain when an Omani company is exposed to currency risk for the changes in prices of OMR to the US dollar (15 marks).
Macroeconomics Principles, Applications, and Tools
ISBN: 978-0132555234
7th Edition
Authors: Arthur O Sullivan, Steven M. Sheffrin, Stephen J. Perez