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CMA Final · Strategic Financial Management · Foreign Exchange Market

A Mumbai exporter expects to receive USD 200,000. The bank quotes USD/INR spot as 83.2000/83.2800. If the exporter sells the dollars to the bank at spot, how many rupees will be received?

The exporter receives Rs 16,640,000. The bank buys dollars at its lower bid rate of 83.20, so 200,000 multiplied by 83.20 gives the rupee proceeds. The higher ask rate applies only when the bank sells dollars to a customer.

  1. ARs 16,656,000
  2. BRs 16,640,000Correct
  3. CRs 16,600,000
  4. DRs 16,720,000

Explanation

The bank buys USD at the lower (bid) rate of 83.2000. 200,000 x 83.20 = Rs 16,640,000. Using the ask rate of 83.28 gives Rs 16,656,000, which is wrong because the bank would sell, not buy, dollars at that rate.

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