CMA Final · Strategic Financial Management · Forwards and Futures
Sundaram Exports expects to receive 2,00,000 USD in three months and sells 4 futures of USD 50,000 each at Rs 83.00. At maturity spot is Rs 84.20 and the futures close at Rs 84.20. What is the effective realisation in rupees?
The effective realisation is Rs 1,66,00,000. The spot sale yields Rs 1,68,40,000, but the short futures lose Rs 1.20 per dollar, or Rs 2,40,000. Net proceeds equal the locked futures rate of Rs 83 on USD 2,00,000 because the hedge is perfect.
- ARs 1,66,00,000Correct
- BRs 1,68,40,000
- CRs 1,70,80,000
- DRs 1,64,80,000
Explanation
Spot sale: 2,00,000 x 84.20 = Rs 1,68,40,000. Futures loss = (84.20 - 83.00) x 2,00,000 = Rs 2,40,000. Net = 1,68,40,000 - 2,40,000 = Rs 1,66,00,000, which equals 2,00,000 x 83.00. Rs 1,68,40,000 ignores the futures loss.
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