CMA Final · Strategic Financial Management · Foreign Exchange Market
A Mumbai importer quotes: spot USD/INR = 83.2000 to 83.2800. The 6-month forward premium on USD is 40 paise to 50 paise (bid to offer). What is the 6-month outright forward ask rate for USD (rate at which the bank sells USD forward)?
The 6-month forward ask rate for USD is Rs 83.7800. A premium is added to spot, and the bank's selling rate pairs the spot ask of 83.2800 with the larger premium of 50 paise, giving 83.7800.
- A83.7800Correct
- B83.6400
- C83.7000
- D82.7800
Explanation
Premium on USD is added to the spot. The ask (bank sells) rate uses the offer-side premium: 83.2800 + 0.5000 = 83.7800. Adding 0.40 gives 83.6800 which is not an option; 83.6400 and 83.7000 mix up sides or bases, and subtracting the premium (82.7800) treats it as a discount.
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