abhishreshthaa
Abhijeet S
FORWARD DEAL
A forward foreign exchange transaction is one which is executed today
at a rate agreed today but settlement takes place at an agreed future time
FX forwards are normally short term - one to twelve months
Forward Deal (e.g.)
A corporate needs USD 1 million for an import payment 12 months hence. Thus it asks a bank for a
rate for the same.
A forward foreign exchange transaction is one which is executed today
at a rate agreed today but settlement takes place at an agreed future time
FX forwards are normally short term - one to twelve months
Forward Deal (e.g.)
A corporate needs USD 1 million for an import payment 12 months hence. Thus it asks a bank for a
rate for the same.
- Bank buys USD at 48.30
- Places Deposit @ 2.2%
- Gets USD 1,022,000
- Borrows INR 48,300,000
- Borrows @ 8.25 %
- Pays INR 52,284,750
- Final Rate = 52,284,750/1,022,000 = 51.16
- Premium = Rs 51.16 - 48.30 = 2.86