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CMA Final · Strategic Financial Management · Foreign Exchange Market

An importer must pay USD 50,000 in 3 months. Spot is 83.00 and the 3-month forward is 83.60. If the spot after 3 months turns out to be 84.20, how much does the importer gain by having bought forward rather than waiting to buy at spot?

The importer gains Rs 30,000. Locking in 83.60 costs Rs 41,80,000, while buying at the actual 84.20 spot would cost Rs 42,10,000. The difference of 0.60 per dollar on 50,000 dollars is the saving.

  1. ARs 30,000Correct
  2. BRs 20,000
  3. CRs 12,000
  4. DRs 42,000

Explanation

Buying at the forward costs 50,000 x 83.60 = Rs 4,180,000. Buying at the later spot costs 50,000 x 84.20 = Rs 4,210,000. Gain = Rs 30,000. Rs 20,000 would wrongly use the initial spot of 83.00 against the future spot.

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