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CMA Final · Strategic Financial Management · Foreign Exchange Market

A Mumbai exporter's bank quotes USD/INR spot as 83.2000 - 83.2800 (bid - ask). The exporter sells USD 50,000 to the bank at spot. How many rupees will the exporter receive?

The exporter receives INR 41,60,000. The bank buys dollars at its lower bid rate of 83.20, so 50,000 multiplied by 83.20 gives the rupee amount. The higher ask rate applies only when the bank sells dollars to a customer.

  1. AINR 41,60,000Correct
  2. BINR 41,64,000
  3. CINR 41,56,000
  4. DINR 83,20,000

Explanation

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

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