IMPORTANT BFM CASE STUDIES ON EXCHANGE RATES – PART 1

BFM CASE STUDY ON EXCHANGE RATES | PART – 1

Prepare your CAIIB BFM exam with important CAIIB BFM CASE STUDY on exchange rate and practice for CAIIB case studies for CAIIB BFM paper.

This article is for those who are looking to sharpen their pencil of practice to get that extra edge in the November CAIIB Exams 2022. If you don’t already know the exam & registration dates of November Attempt then you can visit our page here.

Now about the important part, we will provide you some case studies on the concept of Exchange Rate from the applicable syllabus for CAIIB Exams 2022. And before we begin with them, we would like to tell you that we also help the CAIIB candidates pass CAIIB by providing them our exclusive study material.

The study material is in the form of video lectures which includes the case studies with proper conceptual coverage & explanations. The CAIIB BFM Study Material or full course has the following features:

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Read Also: CAIIB BFM SYLLABUS PRIORITY | CAIIB NOV/DEC EXAM 2022

BFM CASE STUDIES FOR CAIIB EXAM 2022

BFM CASE STUDY ON EXCHANGE RATE 1:

An exporter submitted a bill of export amounting USD 100000 drawn on 120 days usance basis from date of shipment, which took place on 3rd of August 2015. You have the following further information:

• The due date = 1 Dec 2015.

• The exchange margin = 0.20%.

• Spot inter-bank USD rate = Rs.45.00/05.

• Premium spot Nov = 0.40/45

• Commission on bill purchase = 0.50%

• Rate is quoted to nearest INR = 0.25 and rupee amount to be rounded off accordingly
• Interest rate = 8% for up to 180 days.

Now, you need to answer the following questions:

Q-01: What will be the rate at whxchange rateich the bill will-be purchased in case it is a demand bill after bank margin is adjusted, without taking into consideration, the premium?

1. Rs.44.91 
2. Rs.45.09 
3. Rs.45.31 
4. Rs.45.51

Q-02: What will be the rate at which the bill will-be purchased by bank if it is a demand bill after adjusting bank margin & premium?

1. Rs.44.91 
2. Rs.45.09 
3. Rs.45.31 
4. Rs.45.51

Q-03: What will be the gross amount before interest and commission are applied?

1. Rs.45,31,000 
2. Rs.44,10,174 
3. Rs.44,07,908.50 
4. Rs.45,07,909

Q-04: What amount will be credited to account of exporter?

1. Rs.45,31,000 
2. Rs.44,10,174 
3. Rs.44,07,908.50 
4. Rs.45,07,909

Q-05:  What will be bill amount without bank commission?

1. Rs.45,31,000 
2. Rs.44,10,174 
3. Rs.44,07,908.50 
4. Rs.45,07,909

Answers of BFM Case study on exchange rate 1:

1-I 

2-III 

3-I 

4-IV 

5-II 

Explanation of Answers of BFM Case study on exchange rate 1:

A-1. Calculation of purchase rate is as under:

Spot rate = Rs.45.00 (buying rate will be applied because it is purchase)

Less: 0.20% of margin = Rs.00.09 (from spot rate)

Purchase Rate = Rs.44.91

A-2. Calculation of re-purchase rate is as under:

Spot rate = Rs.45.00 (buying rate will be applied as it is purchase)

Less: 0.20% margin of spot rate = Rs.00.09 

Rate = Rs.44.91

Add: premium = Rs.00.40 (premium will be added as that benefit will be of the customer) 

Re-purchase Rate = Rs.45.31

A-3. Calculation of gross amount before interest and commission are applied is as under:

Spot rate = Rs.45.00 (buying rate will be applied as it is purchase) 

Less: 0.20% margin of spot rate = Rs.00.09

Rate = Rs.44.91 

Add: premium = Rs.00.40 (premium will be added as that benefit will be of the customer)

Rate to be applied = Rs.45.31 

Gross Amount = Rs. 45.31 x 1,00,000.00 = Rs.45,31,000.00

A-4. Calculation of amount will be credited to account of exporter is as under:

Spot rate = Rs.45.00 

Less: 0.20% margin of spot rate = Rs.00.09

Rate = Rs.44.91 

Add: premium = Rs.00.40

Rate = Rs.45.31 

Gross Amount = Rs. 45.31 x 100000.00 = Rs.45,31,000.00

Interest for 120 days @8% = Rs.120826 

Commission at 0.05% = Rs.2265.50

Amount to be credited in exporter’s account = Rs. 45,31,000.00 – Rs.1,20,826.00 – Rs. 2,265.50 = Rs. 44,07,908.50 i.e. rounded to Rs.44,07,909.00

A-5. Calculation of bill amount without bank commission is as under:

Spot rate = Rs.45.00 

Less: 0.20% margin of spot rate = Rs.00.09

Rate = Rs.44.91 

Add: premium = Rs.00.40

Rate = Rs.45.31 

Gross Amount = Rs. 45.31 x 100000.00 = Rs.45,31,000.00

Interest for 120 days @8% = Rs.120826 

Bill Amount = Rs. 45,31,000.00 – Rs. 1,20,826.00 = Rs.44,10,174.00

Read Also: CAIIB BFM CASE STUDY ON EXCHANGE RATE PART-2

BFM CASE STUDY ON EXCHANGE RATE 2:

A customer desires to book the below forward contracts at given terms:

(A) Forward purchase – USD 50,000.00 for delivery 3RD month

(B) Forward sale – USD 50,000.00 for delivery 2nd month.

Given: 

• Spot rate = 45.1000/45.1200. 

• Premium for 1 month = 0800/0900, 

• Premium for 2 months = 1700/1900,

• Premium for 3 months = 2800/2900,

• Exchange margin for purchase = 0.20% &
• Exchange margin for sale = 0.25%.

Q – 01 What rate will be applicable for forward purchase transaction?

1. 45.4233 
2. 45.2705 
3. 45.1795
4. 45.1700

Q – 02 What rate will be applicable for forward sale transaction?

1. 45.4233 
2. 45.3243 
3. 45.4882
4. 45.3456

Answers of BFM Case study on exchange rate2:

1-III 

2-I 

Explanations of Answers of BFM Case study on exchange rate 1:

1. Calculation of Spot rate for purchase transaction: 

For Purchase – spot rate = Rs. 45.1000

Add: 2 months premium = Rs.00.1700 (premium for 2 months only to be added in purchase as bill may be given on any day of 3’d month including on 13t day) Rate = Rs. 45.2700

Less margin of 0.20% = Rs. 00.0905 

Purchase Rate = Rs. 45.1795

2. Calculation of Spot rate for sale transaction: 

For sale – spot rate = Rs. 45.1200 

Add: 2 months premium = Rs. 00.1900 (premium for full period of 2 months only to be added in sale) 

Rate = Rs. 45.3100 

Add margin of 0.25% = Rs. 00.1133 

Sale Rate = Rs. 45.4233

You can also find the BFM case studies on exchange rate by visiting our official site. We will soon be bringing you the next set of case studies. Till then practice this one & solve it by hand instead of just going through it.

All the best for you CAIIB Exams!

Read Also: IMPORTANT BFM CASE STUDIES ON EXCHANGE RATES – PART 3

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