The following rates are quoted in the Forex market of the London. From the information as given in the table, you are required to calculate the cost and/or value in terms of £ for Lila Ltd., who wishes to (a) Buy € 45,52

CS Professional · Financial, Treasury and Forex Management · PYQS · June 2018
The following rates are quoted in the Forex market of the London. From the information as given in the table, you are required to calculate the cost and/or value in terms of £ for Lila Ltd., who wishes to (a) Buy € 45,520 one month forward from now. (b) Sell Canadian$ 95,750 three months forward from now. Foreign Currency Spot Swap Points - One month forward Swap Points - three months forward Canadian$ 1.8640-8650 40-30 90-80 € 1.1468-72 10-20 45-55 US$ 1.4865-70 20-30 25-35

Answer & Explanation:

If the swap points margin for ask greater than bid, then local currency (sterling Pound); considered at discount. Hence, the forward rate is calculated by adding the margin in the spot. Buy € 45,520- one month forward from now Euro forward 1 month = spot + swap points Here banker is going to sale, hence ask rate applicable 1.1472 + 0.0020 = 1.1492 Cost in terms of £ = 45,520 * 1.1492 = ₹52,311.58 Sell Canadian $ 95,750- three months forward from now Canadian $ Forward 3 months = Spot - Swap points Here banker is going to buy, hence Bid rate applicable. 1.8640 - 0.0090 = 1.8550 Value in terms of £ = 95,750 * 1.8550 = ₹1,77,616.25

Topics: Forex Management

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