M/s Ramesh Kumar Export Pvt. Ltd. (Customer) requested Bank to book a forward sale contract for US $ 100000 deliver after 3 months. US $ are quoted in the local interbank market as under: Spot US $ 1 = ₹ 68.7400/7500, On

CS Professional · Banking - Law & Practice · PYQS · December 2019
M/s Ramesh Kumar Export Pvt. Ltd. (Customer) requested Bank to book a forward sale contract for US $ 100000 deliver after 3 months. US $ are quoted in the local interbank market as under: Spot US $ 1 = ₹ 68.7400/7500, One month forward premium: 0.0850/0.0900, Two months forward premium: 0.3650/0.3700, Three months forward premium: 0.6300/0.6350. Additional information: (a) Exchange profit must be included in the rate quoted to the Customer. (b) Rate quoted should be nearest to the fourth decimal in multiples of 0.0025. (c) Brokerage and other charges may be ignored. (d) Bank is entitled to exchange profit of 0.10% on the transaction. Calculate the rate which will be quoted by you as a banker to M/s Ramesh Kumar Export Pvt. Ltd. What will be bank's profit from this transaction?

Answer & Explanation:

Calculation of Bank's profit from Transaction Interbank spot selling rate 68.7500 Add: Three month forward premium 0.6350 69.3850 Add: Exchange profit 0.10% 0.069385 69.454385 Rounded off to higher amount 69.4550 Profit on the transaction: Rate quoted to the customer 69.4550 (i) US $ 100000 @ 69.4550 6945500 (ii) Less: US$ 100000 @ 69.3850 6938500 Profit (i) - (ii) 7000

Topics: Foreign Exchange Operations

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