TYPE 5: FORWARD PURCHASE CONTRACT CANCELLED ON SPOT DATE
TYPE 5: FORWARD PURCHASE CONTRACT CANCELLED ON SPOT DATE
Calculate the rate at which a booked forward purchase contract of USD 100000.00 due on spot date is cancelled? (Interbank spot rate is 48.5125/5175 and exchange margin on TT purchase is 0.08% and TT selling is 0.15% ). Solution: Kindly Remember : Forward Purchase contracts are always booked using TT Buying Rate. Now, when forward Purchase contract is cancelled, we need to apply TT Selling rate.
So apply TT selling rate. Selling Rate = 48.5175. Margin = 0.15% x 48.5175 = 0.0727.
Keep in Mind : Banks will always Subtract margin while buying and Add margin while selling which simply means buy low and sell high to make profit.
Apply Margin, Rate = 48.5175 + 0.0727 = 48.5902.
As we are selling dollars, we would receive rupees. Thus, We need to debit the customer's account by - 48.5902 x 100000 = Rs. 4,859,020
Additional Problem linked to above :
Calculate the difference to be charged/paid to the customer, in the above question, if the original contract was booked at Rs 49.7500 per USD.
Solution:
Original purchase contract was booked at 49.75 – margin. Margin = 0.08% x 49.75 = 0.0398 .
Keep in Mind : Banks will always Subtract margin while buying and Add margin while selling which simply means buy low and sell high to make profit.
Rate = 49.75 – 0.0398 = 49.7102. As we are buying dollars, we have to credit Customer's Account. Hence, Amount which was credited = 49.7102 x 100000 = Rs. 4,971,020. Here the Customer gains by the difference : Rs. 4,971,020 - Rs. 4,889,020 = Rs.82,000/-
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