Old MathJax webview

ABC Limited is engaged in the business of export of superior quality basmati rice to USA and EU countries. On May 15,2008, ABC negotiated an order from XYZ Inc, a USA based company, ofr the supply of 10,000 Tons of rice at the rate of US $2000 per ton. Immediately after acceptance of the order by ABC, the goverment offered to suppply rice through Thailand which has been accepted by XYZ. After due consultantion with the Thai Company, ABC and XYZ agreed to the following terms and conditions on May 31,2008: The quantity and price per ton will remain unchanged. First consignment of 4000 tons will be shipped in the last week of June 2008 and the balance will be shipped during the last week of July 2008. Shipment will be made directly to XYZ. XYZ will make payment to ABC after one month of shipment. It was agreed with the Thai Company that ABC shall make the payment on shipment, at the rate of Thai Bhat 50,000 per ton. ABC has a policy to hedge all foreign currency transactions in excess of Rs 25 Million by obtaining forward cover. ABCs bank has arranged the forward cover and advised the following exchange rates on May 31,2008: Thai Bhat US $ Buy Sell Buy Sell Spot Rs 2.33 Rs 2.32 Rs 65.12 Rs 65.24 1 Month Forward Rs 2.30 Rs 2.33 Rs 65.45 Rs 65.57 2 Month Forward Rs 2.28 Rs 2.31 Rs 65.77 Rs 65.89 3 Month Forward Rs 2.26 Rs 2.29 Rs 66.10 Rs 66.22

The bank charges a commission of 0.01% on each transaction. Required: Calculate the profit or loss on the above transaction under each of the following options: The shipments are made according to the agreed schedule On July 31,2008, the parties agree to delay the second shipment for a period of two months. The rates expected to prevail on July 31,2008 are as follows: Thai Bhat US $ Buy Sell Buy Sell Spot Rs 2.29 Rs 2.32 Rs 65.61 Rs 65.73 1 Month Forward Rs 2.27 Rs 2.30 Rs 65.84 Rs 65.96 2 Month Forward Rs 2.25 Rs 2.28 Rs 66.16 Rs 66.28 3 Month Forward Rs 2.23 Rs 2.26 Rs 66.38 Rs 66.50 The second shipment is cancelled on July 31,2008. The exchange rates are expected to be the same a in (b) above.

- We make Payment AB atter one mono SOAP agreed with the Thai Company that ABC shall make the pa per ton. as a policy to hedge all foreign currency transactions in ex bank has arranged the forward cover and advised the follo Thai Bhat Buy Sell Rs 2.33 Rs 2.32 Spot 1 Month Forward Rs 2.30 Rs 2.33 2 Month Forward Rs 2.28 Rs 2.31 3 Month Forward Rs 2.26 Rs 2.29 ink charges a commission of 0.01% on each transaction. red: ate the profit or loss on the above transaction under each of Tone month of shipment. BC shall make the payment on shipment, at the rate of Thai ! transactions in excess of Rs 25 Million by obtaining forw ind advised the following exchange rates on May 31,2008: Thai Bhat US $ Sell Sell Buy Rs 65.12 Rs 2.32 Rs 65.24 Rs 2.33 Rs 65.45 Rs 65.57 Rs 2.31 Rs 65.77 Rs 65.89 Rs 2.29 Rs 66.10 Rs 66.22 each transaction. - We make Payment AB atter one mono SOAP agreed with the Thai Company that ABC shall make the pa per ton. as a policy to hedge all foreign currency transactions in ex bank has arranged the forward cover and advised the follo Thai Bhat Buy Sell Rs 2.33 Rs 2.32 Spot 1 Month Forward Rs 2.30 Rs 2.33 2 Month Forward Rs 2.28 Rs 2.31 3 Month Forward Rs 2.26 Rs 2.29 ink charges a commission of 0.01% on each transaction. red: ate the profit or loss on the above transaction under each of Tone month of shipment. BC shall make the payment on shipment, at the rate of Thai ! transactions in excess of Rs 25 Million by obtaining forw ind advised the following exchange rates on May 31,2008: Thai Bhat US $ Sell Sell Buy Rs 65.12 Rs 2.32 Rs 65.24 Rs 2.33 Rs 65.45 Rs 65.57 Rs 2.31 Rs 65.77 Rs 65.89 Rs 2.29 Rs 66.10 Rs 66.22 each transaction