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CMA Final · Strategic Financial Management · Forwards and Futures

Meera Exports expects to receive USD 200,000 in 3 months and sells USD futures at Rs 83.40 per USD to hedge. At maturity, spot is Rs 82.90 and the futures settles at Rs 82.95. Ignoring margin costs, what is the effective rupee realisation per USD when she sells the dollars in the spot market and closes out the futures?

The effective realisation is Rs 83.35 per USD. She sells dollars at spot Rs 82.90 and earns Rs 0.45 per USD on the short futures (83.40 minus 82.95). The remaining Rs 0.05 shortfall from 83.40 is basis risk.

  1. ARs 83.35Correct
  2. BRs 82.90
  3. CRs 83.40
  4. DRs 82.95

Explanation

Futures gain = 83.40 - 82.95 = Rs 0.45 per USD. Effective realisation = spot 82.90 + 0.45 = Rs 83.35. The difference from 83.40 is the basis risk of Rs 0.05 (spot-futures gap at close). Rs 82.90 ignores the hedge gain.

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