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CMA Final · Strategic Financial Management · Foreign Exchange Market

A Mumbai bank quotes USD/INR spot as 83.2000/83.2800. An importer needs to buy USD 50,000 from the bank. How many rupees will the importer pay?

The importer pays Rs 41,64,000. A bank sells dollars at its higher ask rate of 83.28, so 50,000 multiplied by 83.28 gives the rupee cost. The bid rate applies only when the bank buys dollars from a customer.

  1. A41,60,000
  2. B41,64,000Correct
  3. C41,56,000
  4. D83,28,000

Explanation

The bank sells USD at the ask rate, 83.28. Payment = 50,000 x 83.28 = Rs 41,64,000. Using the bid rate of 83.20 gives Rs 41,60,000, which is wrong because the bank buys at the bid, not sells.

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