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CMA Final · Strategic Financial Management · Foreign Exchange Market

A bank quotes USD/INR spot as 83.2000/83.2800 (bid/ask). A Pune exporter sells USD 50,000 to the bank at this quote. How many rupees does the exporter receive?

The exporter receives Rs 41,60,000. A bank buys foreign currency at its lower bid rate, so USD 50,000 is converted at 83.20. Using the ask rate of 83.28 would be wrong because that is the rate at which the bank sells dollars to customers.

  1. ARs 41,60,000Correct
  2. BRs 41,64,000
  3. CRs 41,56,000
  4. DRs 41,62,000

Explanation

The bank buys USD from the exporter at its bid rate, which is 83.2000. Receipt = 50,000 x 83.20 = Rs 41,60,000. Rs 41,64,000 wrongly uses the ask rate at which the bank sells dollars.

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