CMA Final · Strategic Financial Management · Forwards and Futures
A company expects to receive USD 200,000 in 3 months and sells USD futures at Rs 84.50. At maturity the spot rate is Rs 83.90 and the futures are closed out at Rs 83.95. What is the net rupee realisation, ignoring costs?
The net realisation is Rs 1,68,90,000. The company sells the dollars at the spot rate of 83.90 for Rs 1,67,80,000 and earns Rs 1,10,000 on the short futures, since they fell from 84.50 to 83.95.
- ARs 1,68,10,000
- BRs 1,68,00,000
- CRs 1,68,90,000Correct
- DRs 1,67,80,000
Explanation
Sell dollars in spot at 83.90: 200,000 x 83.90 = Rs 1,67,80,000. Futures gain = (84.50 - 83.95) x 200,000 = 0.55 x 200,000 = Rs 1,10,000. Net = 1,67,80,000 + 1,10,000 = Rs 1,68,90,000. Rs 1,67,80,000 ignores the futures gain.
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