An export customer has a bill for ₹ 100,000, the bank has to purchase £ (Pound Sterling) from him and give an equivalent amount in rupees to the customer. Presuming the inter-bank market quotations for spot delivery are

There are two transactions for the Bank: Sell £ 100,000 in the London Market against US$ The bank has to sell £'s in the London market at US$ 1.9720, i.e. the market's buying rate for £1. Sell US$ in the local Interbank Market against Rupees. The US dollars so obtained have to be disposed-off in the local inter-bank market at US$ 1 = ₹ 60.8450 (market's buying rate) for US$. By chain rule, we get: £ 1 = 1.9720 X 60.8450 = ₹ 119.9863 Total amount in Rupees for £ 100,000 = 100000 × 119.9863 = 1,19,98,630