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Querist : Anonymous

Querist : Anonymous (Querist)

27 July 2012 Hi! I need some help in foreign exchange risk management. The sum is as follows:
X ltd, an Indian company has bought goods worth 100 lacs & has to make payment in exporter's home currency. The following rates are available:
INR = $ 0.025 - $0.02
= $1.40 - $ 1.48
= 0.0069 - 0.0049
You are required to calculate the INR cost of the deal today.
I am getting the answer as Rs 48,30,000 however the answer given is Rs 51,06,000 which I feel is wrong. Please confirm which of the answers is right. Also if i'm wrong then plz explain why.

Querist : Anonymous

Querist : Anonymous (Querist)

27 July 2012 * the exchange rates are :
INR = $0.025 - $0.02; = $1.40 - $1.48; = 0.0069 -0.0049

Querist : Anonymous

Querist : Anonymous (Querist)

27 July 2012 * GBP = $1.40 - $1.48 and yen = GBP 0.0069 - GBP0.0049
* also the goods are worth yen 100 lacs

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CA. Sunil Kumar

CA. Sunil Kumar (Expert)
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02 August 2012 NR = $ 0.020 - $0.025

Þ $= INR 1/.025- 1/.020

GBP= $1.40 - $ 1.48

YEN = GBP0.0049 - GBP0.0069

Since for import customer has to buy the Yen it will be at the market offer rate:

INR/Yen offer = Multiply all the offer rates= 1/.020 × 1.48×.0069=.5106

as market always buy at low rate and sells at higher rate.So we will change the quotes as per the practical convention.

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