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# MGT411 Assignment No 1 Solution & Discussion Due Date:12-04-2012

SEMESTER SPRING 2012
MGT411 (Money and Banking)
Assignment No. 1
Due Date: April 12, 2012 Marks: 20
Assignment:
Question No. 1 (Marks 10)
Suppose you were given a responsibility to measure the inflation rate prevailing in the country for the
last five years. You conducted a survey in the market over the years and selected a basket of goods
containing 10 mangoes, 08 apples, 03 onions and 6 eggs for measuring inflation.
Per unit prices are given in the following table:
Per Unit Prices in Rupees
Years Mango Apple Onion Egg
2007 15 4 2 2
2008 20 5 2 3
2009 22 6 3 4
2010 30 10 3 5
2011 35 15 4 8
Requirement:
You are required to calculate the inflation rate based on the above market data?
Question No.2 (Marks 10)
The Central Bank (CB) is a supreme regulatory authority for the supervision of financial and banking
system in order to control the inflation and promoting economic growth in the country.
According to an annual report of the CB published at the end of the year 2011, the outstanding stock
of currency in the hands of the public was 866,700 million rupees; Traveler’s checks were amounting
to 415.3 million rupees; the Outstanding Stock of Time Deposits of Scheduled Banks was 1,204,340
million rupees; the Demand Deposits with Scheduled Banks were 802,570 million rupees; Other
Deposits with the CB were 4,680 million rupees; Institutional money market mutual fund shares were
1,205.8 million rupees; Large-denomination time deposits were 937.5 million rupees; the Outstanding
Stock of Resident Foreign Currency Deposits (RFCDs) was 170,130 million rupees and Eurodollars
and repurchase agreements were 416.7 and 235.5 million rupees respectively.
Keeping in view the above information, you are required to calculate M1, M2 and M3.
Note:
Only in the case of Assignment, 24 hours extra / grace period after the due date is
usually available to overcome uploading difficulties which may be faced by the students
on last date. This extra time should only be used to meet the emergencies and above
mentioned due dates should always be treated as final to avoid any inconvenience.
Important Instructions:
· Make sure that you upload the solution file before the due date. No assignment
will be accepted through e-mail once the solution has been uploaded by the
instructor.
Formatting guidelines:
· Use the font style “Times New Roman”/ “Arial” and font size “12”.
· Use black and blue font colors only.
Solution guidelines:
· Every student will work individually and has to write in the form of an analytical
assignment.
· Give the answer according to question.
· For acquiring the relevant knowledge don’t rely only on handouts but watch the
video lectures and use other reference books also.
Rules for Marking
· It has been submitted after due date
· The file you uploaded does not open or is corrupt
· It is in any format other than .doc (MS. Word)
It is cheated or copied from other students, internet, books, journals etc…
Important Note for those courses where calculations and graphs are
required.
· Calculate to the point where calculation is being required. NO need to write irrelevant
material or extra interpretation.
· Draw diagrams by yourself. Do NOT copy from any source. NO need to write
irrelevant material.SEMESTER SPRING 2012
MGT411 (Money and Banking)
Assignment No. 1
Due Date: April 12, 2012 Marks: 20
Assignment:
Question No. 1 (Marks 10)
Suppose you were given a responsibility to measure the inflation rate prevailing in the country for the
last five years. You conducted a survey in the market over the years and selected a basket of goods
containing 10 mangoes, 08 apples, 03 onions and 6 eggs for measuring inflation.
Per unit prices are given in the following table:
Per Unit Prices in Rupees
Years Mango Apple Onion Egg
2007 15 4 2 2
2008 20 5 2 3
2009 22 6 3 4
2010 30 10 3 5
2011 35 15 4 8
Requirement:
You are required to calculate the inflation rate based on the above market data?
Question No.2 (Marks 10)
The Central Bank (CB) is a supreme regulatory authority for the supervision of financial and banking
system in order to control the inflation and promoting economic growth in the country.
According to an annual report of the CB published at the end of the year 2011, the outstanding stock
of currency in the hands of the public was 866,700 million rupees; Traveler’s checks were amounting
to 415.3 million rupees; the Outstanding Stock of Time Deposits of Scheduled Banks was 1,204,340
million rupees; the Demand Deposits with Scheduled Banks were 802,570 million rupees; Other
Deposits with the CB were 4,680 million rupees; Institutional money market mutual fund shares were
1,205.8 million rupees; Large-denomination time deposits were 937.5 million rupees; the Outstanding
Stock of Resident Foreign Currency Deposits (RFCDs) was 170,130 million rupees and Eurodollars
and repurchase agreements were 416.7 and 235.5 million rupees respectively.
Keeping in view the above information, you are required to calculate M1, M2 and M3.
Note:
Only in the case of Assignment, 24 hours extra / grace period after the due date is
usually available to overcome uploading difficulties which may be faced by the students
on last date. This extra time should only be used to meet the emergencies and above
mentioned due dates should always be treated as final to avoid any inconvenience.
Important Instructions:
· Make sure that you upload the solution file before the due date. No assignment
will be accepted through e-mail once the solution has been uploaded by the
instructor.
Formatting guidelines:
· Use the font style “Times New Roman”/ “Arial” and font size “12”.
· Use black and blue font colors only.
Solution guidelines:
· Every student will work individually and has to write in the form of an analytical
assignment.
· Give the answer according to question.
· For acquiring the relevant knowledge don’t rely only on handouts but watch the
video lectures and use other reference books also.
Rules for Marking
· It has been submitted after due date
· The file you uploaded does not open or is corrupt
· It is in any format other than .doc (MS. Word)
It is cheated or copied from other students, internet, books, journals etc…
Important Note for those courses where calculations and graphs are
required.
· Calculate to the point where calculation is being required. NO need to write irrelevant
material or extra interpretation.
· Draw diagrams by yourself. Do NOT copy from any source. NO need to write
irrelevant material.

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### Replies to This Discussion

r u sure second Q is right????????????

MGT411 Assignment#1 Solution Spring 2012

Attachments:

SEMESTER SPRING 2012

MGT411 (Money and Banking)

Assignment No. 1

Question No. 1

Solution:

 Years Cost of Basket Consumer Price index Inflation rate 2007 200 100 n.a. 2008 264 132 32% 2009 301 150.5 14% 2010 419 209.5 39.2% 2011 530 265 26.5%

Question No. 2

Solution:

 M1 = Currency in the hands of the public  +Traveler’s checks+ Scheduled Banks Demand deposits+ Other deposits Central Bank 866,700+415.3+802,570+4,680=1674365.3 M2 =  M1+ Outstanding Stock of Time Deposits of Scheduled Banks+ Stock of Resident Foreign Currency Deposits 1674365.3+1,204,340+170,130=3048835.3 M3= M2+  Institutional money market mutual fund shares + Large-denomination time deposits+ Eurodollars+ Repurchase agreements 3048835.3+1205.8+937.5+416.7+235.5=3051630.8

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