IMPORTANT BFM CASE STUDIES ON EXCHANGE RATES – PART 2

BFM CASE STUDY ON EXCHANGE RATES | PART – 2

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

This article is the 2nd installment of BFM Case Studies written for those CAIIB candidates who are looking to sharpen their CAIIB Exam practice in order to clear the November CAIIB BFM Exam 2023. To take a look at the exam & registration dates of CAIIB November 2023 Attempt you can visit our page here.

Now about the part where we will provide you with some case studies on the concept of Exchange Rate from the applicable CAIIB syllabus for 2023 Exams. But before we start with the case studies, we would like to tell highlight the fact that we also have the CAIIB Study Material for candidates to help them pass CAIIB 2023, especially looking at the fact that this attempt is going to be last under the current CAIIB Syllabus 2023. 

We have the CRASH COURSE FOR CAIIB which will help you in getting clarity on the BFM concepts that will surely help in passing the Certified Associate of the Indian Institute of Bankers Exams including the important case studies. The Cash Course has been fully developed to provide proper conceptual coverage & explanations. The features of CAIIB BFM Study Material or full course are:

• Conceptual Coverage of BFM
• Case studies of BFM with detailed explanations
• BFM Mock tests 2023
• BFM Notes in soft form (epdfs)
• Accessibility of BFM material via mobile as well as desktops
• Soft Material & no hard copies
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• Latest exam pattern & applicable BFM syllabus 2023

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Also Read: CAIIB HRM CLASSES SCHEDULE FOR NOVEMBER EXAMS 2023

BFM CASE STUDIES FOR CAIIB EXAM 2023

BFM CASE STUDY ON EXCHANGE RATES 3:

A customer, an importer, wants to retire an import bill of Pound Sterling 1,00,000.00 drawn under LC opened by you, and payable on demand on 12th of Oct 2012. 

The other details are: 

• TT margin = 0.10%. 

• The inter-bank rates = GBP/USD = 1.5975/1.6000 

• The inter-bank rates = USD/1NR = Rs.44.90/45.00. 

On the basis of above date, you need to answer the following questions:

Q-01: What rate will be quoted by the bank for this transaction in terms of GBP/INR if TT margin is not taken into account?

1. Rs.71.7276 
2. Rs.71.9085 
3. Rs.72.0000 
4. Rs.72.0720

Q-02: What rate will be quoted by the bank for this transaction in terms of GBP/1NR if TT margin is taken into account?

1. Rs.71.7276 
2. Rs.71.9085 
3. Rs.72.0000 
4. Rs.72.0720

Q-03: What will be the amount to be debited to cash credit or overdraft or current account of the customer for retiring this bill?

1. Rs.7000000 
2. Rs.7207200 
3. Rs.7218300 
4. Rs.7222070

Q-04: If this bill is not retired by the importer customer, when will be the crystallization of this import bill? 

1. 12th of October 2012 
2. 21st of October 2012 
3. 22nd of October 2012 
4. 12th of November 2012

Answers of BFM Case study ON EXCHANGE RATES 3:

1-III 

2-IV 

3-II 

4-III

Explanation of Answers of BFM Case study ON EXCHANGE RATES 3:

1. Quoted rate by the bank for this transaction in terms of GBP/INR if TT margin is not taken into account:

Because this is a sale transaction for the bank, the bank will be willing to  purchase the pounds i.e GBP at market selling rate & will sell the USD to the customer so that he/she can purchase pounds. 

The rate will be = 1.6000 and 45.00. 

Hence, the GBP/INR = 1.6000 x 45.00 = 72.00. 

Add: margin of 0.10% = 0.0720. 

The rate = Rs. 72.00 + 0.720 = Rs. 72.72. 

& the customer will be required to pay = Rs. 72.072 x 1,00,000.00 = Rs.72,07,200.00

2. Quoted rate by the bank for this transaction in terms of GBP/INR if TT margin is taken into account:

Because this is a sale transaction for the bank, the bank will be willing to purchase pounds (GBP) at market selling rate and will sell the USD to the customer to purchase pounds. 

The rate = 1.6000 and 45.00. 

Hence, the GBP/INR = 1.6000 x 45.00 = Rs. 72.00. 

Add: margin of 0.10% = Rs. 0.0720. 

The applicable rate = Rs. 72.00 + Rs. 0.720 = Rs. 72.072.

3. Amount to be debited to CC or OD or current account of the customer for retiring this bill will be:

Because this is a sale transaction for the bank, the bank will be willing to purchase pounds (GBP) at market selling rate and will sell the USD to the customer to purchase pounds. 

The rate = 1.6000 and 45.00. 

Hence, the GBP/INR = 1.6000 x 45.00 = Rs. 72.00. 

Add: margin of 0.10% = Rs. 0.0720. 

The applicable rate = Rs. 72.00 + Rs. 0.720 = Rs. 72.072. 

The customer will be required to pay = Rs. 72.072 x 1,00,000.00 = Rs.72,07,200.00

4. If this bill is not retired by the importer customer, the crystallization of this import bill will be:

The bill is to be paid on demand i.e. 12th of October 2012 and according to FEDAI rules, in the cases where the demand import bills drawn under LC are not retired on demand, they are to be crystallized within 10 days from the demand date. 

Hence, the latest date by which bill must be crystallized is 22nd of October 2012.

Also Read: IMPORTANT BFM CASE STUDIES ON EXCHANGE RATES – PART 1

CAIIB BFM CASE STUDY ON EXCHANGE RATES 4:

An importer has requested on 1st of Sep 2012 to book a forward contract for payment of his import bill of USD 50,000.00 due for 15th of Dec 2012. 

The data related to this regard is:

• Spot rate = USD/INR = 45.10/20. 

• Forward premium for Sep = 10/14 paise, 

• Forward premium for Oct = 22/24 paise, 

• Forward premium for Nov = 33/35 paise, 

• Forward premium for Nov to Dec 15 = 12/14 paise. 
• Bank is to charge margin = 0.20%. 

Q-01: What rate will be quoted by the bank if it doesn’t take into account the margin?

1. Rs.45.2000 
2. Rs.45.5500
3. Rs.45.6900 
4. Rs.45.7814

Q-02: What rate will be quoted by the bank if it does take into account the margin?

1. Rs.45.2000 
2. Rs.45.5500
3. Rs.45.6900 
4. Rs.45.7814

Answers of BFM Case study ON EXCHANGE RATES 4:

1-I 

2-II

Explanations of Answers of BFM Case study ON EXCHANGE RATES 4:

1. Rate that will be quoted by the bank if it doesn’t take into account the margin is:

Because this is FC sale transaction, 

Spot rate = 45.20 

Add: Nov premium + premium up to Dec 15 = Rs. 0.35 + Rs. 0.14 

The Rate = Rs. 45.69. 

Add: the margin of 0.20% = Rs. 0.09138 

The Quoted rate = Rs. 45.7814.

2. Rate that will be quoted by the bank if it takes into account the margin is: 

Because this is FC sale transaction: 

Spot rate = 45.20 

Add: Nov premium + premium up to Dec 15 = Rs. 0.35 + Rs. 0.14 

The Rate = Rs. 45.69. 

Add: the margin of 0.20% = Rs. 0.09138 

The Quoted rate = Rs. 45.7814.

You can also find the BFM case studies Part-1 on exchange rate (covers BFM Case Study 1 & 2) by visiting our official site. We will soon be bringing you the next set of case studies soon. Till then practice this one & solve it by hand instead of just going through it.

All the best for your CAIIB Exams 2023!

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

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