Foreign exchange Math solution
International Trade & Foreign Exchange Math solution
November 2017
Please calculate the exchange rate for buying a 120 day bill 20
denominated in pound sterling using the following parameters
£ 1 = $ 1.4947 - 1.4957
$ 1 = Tk. 78.9020-78.10
Transit period 10 days
Interest rate 10% p.a
Profit margin per pound sterling Tk. 0.10
(Assume 360 days a year.)
Solution:
Given, £ 1 = $ 1.4947 - 1.4957
$ 1 = Tk. 78.9020-78.10
Since it is a direct exchange. So, for direct exchange, Buy low, sale high.
So, £ 1 =$ 1.4947
$1 = Tk. 78.10
£ 1 = Tk. 1.4947 * 78.10
=Tk. 116.73607
Interest charge (For 130 days) = Tk. (116.73607 * 130 * 10)/(360 *100) (days = 120 + 10)
= Tk. (151756.891/36000)
= Tk. 4.21547
Profit margin = Tk 0.10
Exchange rate for £ 1 = Tk. 116.73607 - 4.21547 – 0.10
= Tk. 112.4206November-2010 (Q-7)
An exporter has presented an export bill for Euro 50,000 for negotiation on your bank. By using the following particulars, determine the Euro exchange rate of your bank to purchase the export bill and also determine what amount will be credited to the exporter's account :-
(a) Bill amount- Euro 50,000
(b) Bill Period- 60 days
(c) Transit Period- 10 days
(d) Interest Rate- 5%(Annually)
(e) Profit Margin- BDT 0.10 per Euro
(f) Postage Charge- 1/32%
(g) Existing Exchange Rate:
Euro 1 = USD 1.2215-1.2212
USD 1 = BDT 68.5800-68.5000
(360 days per year is to be considered for calculation.)
Solution:
Given Exchange Rate
Euro 1 = USD 1.2215-1.2212
USD 1 = BDT 68.5800-68.5000
In case of USD-BDT exchange rate, domestic currency (BDT) is flexible and foreign currency (USD) is fixed. So, USD-BDT rate is a Direct Exchange Rate. The maxim of Direct Exchange Rate is, "Buy Low, Sell High". Therefore, the exchange rate of USD-BDT is to be-
USD 1 = BDT 68.5000
It is assumed that local dealer bank will collect the Euro and sell the Euro in order to buy USD from international Money Market. International dealer will purchase Euro in exchange of less amount of USD. So, the Euro-USD exchange rate for local dealer bank is to be-
Euro 1 = USD 1.2212
Now, Euro 1 = 1.2212*1 USD
Euro 1 = 1.2212*68.5000 BDT [USD 1 = BDT 68.5000]
Euro 1 = BDT 83.6522
Calculation of Exchange Margin:
Total Time = Bill Maturity Period + Transit Period = (60+10) Days = 70 Days
Interest = BDT 83.6522*5*70/100*360 = BDT 0.8133
Profit Margin (Per Euro) = BDT 0.1000
Postage Charge = BDT (83.6522*1)/(32*100) = BDT 0.0261
Total Exchange Margin = BDT (0.8133+0.1000+0.0261) = BDT 0.9394
In case of purchase, Local Dealer Bank will realize expenses from the client during calculation of exchange rate for the client. Local dealer bank will provide less amount of BDT to the client in exchange of Euro. That is, during calculation of exchange rate for the client, the amount of total exchange margin has to be deducted from the exchange rate.
So, Euro 1 = BDT (83.6522 - 0.9394) = BDT 82.7182
Therefore, for purchasing of export bill local dealer bank will credit the exporter's account by BDT (50,000*82.7182) = BDT 41, 35,640.00
Fex Math solution 2014, 2015
Ans: Given 1 Euro = $1.4917 – 1.4957
$1 = Tk. 76.5040 – 76.7080
For buying, we assume smaller rate
So, 1 Euro = Tk. 76.5040 X 1.4917 – 76.7080 X 1.4957
|
= 114.1210 – 114.7322
Interest charge 10% = 114.1210 X (130/360) X 0.10
= 4.1210
Profit margin = 0.10
Hence, 1 Euro = 114.1210-4.1210-0.10
= 109.900
Ans: Given, Euro 1 = US$ 1.3050 – 1.3010
US$ 1 = Tk. 76.5040 – 76.7080
For selling rate, we assume higher (2nd) rate
So, Euro 1 = 1.3050 X 76.5040 – 1.3010 X 76.7080
= 99.8377 – 99.7911
Profit margin 0.1% = 99.8377 X 0.1% = 0.0998
Handling charge = 99.8377 X 0.16% = 0.1597
So, 1Euro = Tk. 99.8377+0.0998+0.1597
= Tk. 100.0972
Ans:
Given, US$ 1 = Tk 77.4060 – 77.3050
Euro 1 = $ 1.3080 – 1.3010
So, Euro 1 = Tk. 77.4060 X 1.3080 – 77.3050 X 1.3010
= 101.2470 – 100.5738
Profit margin = Tk 0.20
Overhead charge = 100.5738 X 0.32% = 0.3218
Interest charge = 100.5738 X (65/360) X 5% = 0.9080
Required rateEuro 1 = Tk. 100.5738 - 0.20 - 0.3218 - 0.9080
= Tk. 99.144
Category: DAIBB Tutorial, International Trade and Foreign Exchange
Initial You got a awesome blog .I determination be involved in plus uniform minutes. i view you got truly very functional matters , i determination be always checking your blog blesss. convert $49.99
ReplyDeleteA lot of thanks for math solution
ReplyDelete