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