Katfab Ltd., is facing the problem with respect to management of overseas transactions, which are denominated in the US $. The finance executive of Katfab Ltd. approached the banker, to deal with the transactions, and th

CS Professional · Financial, Treasury and Forex Management · PYQS · December 2019
Katfab Ltd., is facing the problem with respect to management of overseas transactions, which are denominated in the US $. The finance executive of Katfab Ltd. approached the banker, to deal with the transactions, and the following information was provided by the banker : Spot rate: ₹/US$ 66.00 - 25 Forward rate, applicable for end of three months from now: ₹/US$ 67.00 - 50 From the above information, you are required to answer the following questions: (iii) What would be the value of export transactions in terms of US $, if expected value would be ₹45 lakh, at the end of three months' from now ?

Answer & Explanation:

(iii) Value of export transactions in terms of US$ (at the end of three months) Expected value in ₹ = ₹45,00,000 Relevant rate for converting ₹ to US$ for an export transaction (receiving foreign currency) at the end of three months is the Forward Bid Rate. Forward Bid Rate (3 months) = ₹67.00 per US$ Value in US$ = Expected value in ₹ / Forward Bid Rate Value in US$ = ₹45,00,000 / ₹67.00 Value in US$ = US$ 67,164.18

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