ICL an Indian MNC is executing a plant in Sri Lanka. It has raised 400 billion. Half of the amount will be required after six months' time. ICL is…

CA Final · Advanced Financial Management · RTP · May 2026
ICL an Indian MNC is executing a plant in Sri Lanka. It has raised 400 billion. Half of the amount will be required after six months' time. ICL is looking an opportunity to invest this amount on 1st April, 2020 for a period of six months. It is considering two underlying proposals: Market Japan US Nature of Investment Index Fund (JPY) Treasury Bills (USD) Dividend (in billions) 25 - Income from stock lending (in billions) 11.9276 - Discount on initial investment at the end 2% - Interest - 5 per cent per annum Exchange Rate (1st April, 2020) JPY/INR 1.58 USD/INR 0.014 Exchange Rate (30th September, 2020) JPY/INR 1.57 USD/INR 0.013 You, as an Investment Manager, is required to suggest the best course of option. Note: Present all figures in billions and round off the calculations to four decimal places.

Suggested Answer and Working Notes:

Investment in JPY Particulars Currency INR ER Currency JPY (in billions) Available amount 200 1.58 316.0000 Dividend Income 25.0000 Stock Lending Income 11.9276 Investment value at the end after discount @ 2% 309.68 Amount available at the end 346.6076 Conversion as on 30-09-2020 1.57 220.7692 Gain 20.7692 Investment in USD Particulars Currency INR ER Currency USD (in billions) Available amount 200 0.014 2.8000 Interest for 6 months @ 5% p.a. 0.0700 Amount available at the end 2.8700 Conversion as on 30-09-2020 0.013 220.7692 Gain 20.7692 The equivalent amount is same in both the options so ICL is indifferent. However, USD is more stable, and Treasury Bills are risk free, so investment in Treasury Bills (USD) is suggested.

Topics: International Financial Management

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