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noted that, in 38. LC under Forward Rate vs. Cash Credit Facility A Ltd, an Indian Company, is planning to import a special variety of raw material from Japan at a cost of 14,400 Lakhs. A Ltd RTP, N 08 can utilize its Cash Credit Facility at 15% interest p.a. with monthly rests with which it can import the material. However, there is an offer from the Tokyo Branch of an India based Bank extending credit of 180 days at 2% per annum against opening of an irrevocable Letter of Credit. (a) Present Exchange Rate - 100 = \ 360, (b) 180 Days Forward Rate * 100 = 365, (c) Commission Charges for LC = 1/2 % per 6 Months Advise whether A Ltd should accept the offer from the foreign branch? contion 40. Forward Swap, Cancellation, etc. On 10th July, an Importer entered into a Forward Contract with a Bank for US$ 50,000 due on 10th September at an Exchange Rate of 66.8400. The Bank covered its position in the Inter-Bank Market at * 66.6800. How the Bank would react if the customer requests on 20th September - (a) To cancel the contract? (b) To execute the contract? (c) To extend the contract with due date to fall on 10 November? ac below 39. Exchange Rate Gain / Loss Ascertainment U.S. Imports Co purchased 1,00,000 Mark's worth of machines from a Firm in Dortmund, Germany. The value of the dollar in terms of the mark has been decreasing. The firm in Dortmund offers 210, net 90 terms. The Spot Rata for 100 Marks is Dollar 55 the 90 days Forward Rate is $ 56, (a) Compute the $ cost of paying the account with in the 10 days. (b) Compute the $ cost of buying a forward contract to liquidate the account in 90days. (c) Differential between Part (a) and Part (D) is the result of the Time Value of Money (the Discount for pre payment and protection from Currency Value Fluctuation. Determine the magnitude of each of these components If paid within 10 Days, wh Discount of 2 can be availed. re Yariances