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7. CASE STUDY ON FORWARD SALE & FORWARD PURCHASE CONTRACT 

Case Study Question:

QUESTIONS BASED ON FORWARD SALE CONTRACT :

1. Forward sale contract USD 500000 , Delivery 2nd month (full month). If USD/INR spot is 48.7850/7950 & Premium  for-
1 Month 0.08000/0.09000,
2 Month 0.16/0.17,
3 month 2500/2550.
Margin 0.15%.
Find rate ?

Buy low, sell high maxim:
Buy at lowest and sell at the highest rate of the 2 rates before and after the given date. 
We want for 2nd full month. So take 1st month and 2nd month rate you are selling.
Find the rates now: Currency is at premium. Why? Bcoz right side of the rates is higher than left side.
So add the forward points to spot rate.
1 month: 48.7950+0.09 = 48.885, 
2 month: 48.795+0.17 = 48.965.
Sell at highest of the 2 rates. So take, 48.965.
Margin = 0.15% x 48.965 = 0.0734.
We are selling, so add margin.
Rate = 48.965 + 0.0734 = 49.0384
Amount paid to the customer = 49.0384 x 500000
                                      = Rs. 24,519,200

2. Forward sale contract USD 500000 delivery 2nd month (full month). ) if USD/INR spot is 48.7850/7950 & Premium is -
1 Month 0.08000/0.09000,
2 Month 0.16/0.17,
3 Month 2500/2550.
Margin 0.15%.
Find rate ?

Buy low, sell high maxim:
Buy at lowest and sell at the highest rate of the 2 rates before and after the given date. 

We want for 2nd full month. So take 1st month and 2nd month rate. You are selling. Find the rates now: Currency is at premium. Why? Bcoz right side of the rates is higher than left side.
So add the forward points to spot rate.
1 Month: 48.7950+0.09 = 48.885, 

2 Month: 48.795+0.17 = 48.965.
Sell at highest of the 2 rates.
So take, 48.965.
Margin = 0.15% x 48.965 = 0.0734.
We are selling, so add margin.
Rate = 48.965 + 0.0734 = 49.0384
Amount paid to the customer = 49.0384 x 500000
​                                      = Rs. 24,519,200


QUESTIONS BASED ON FORWARD PURCHASE CONTRACT :
1. Rate for forward purchase booking of USD 100,000 delivery 3rd month (full month) if USD/INR Spot is 48.7850/7950 and Premium is-
1 Month 0.08/0.09,
2 Month 0.16/0.17,
3 Month 2500/2550.
Ignore margins .

Buy low, sell high maxim:
Buy at lowest and sell at the highest rate of the 2 rates before and after the given date. 

We want for 3rd full month. So take 2nd month and 3rd month rate. You are buying. Find the rates now: Currency is at premium. Why? Bcoz right side of the rates is higher than left side.
So add the forward points to spot rate.
2 Month: 48.7850+0.16 = 48.945, 

3 Month: 48.785+0.2500 = 49.035.
Buy at lowest of the 2 rates.
So take, 48.945.
No margins.
Amount paid to the customer = 48.945 x 100000
                                      = Rs. 4,894,500

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