Find expected exchange loss at spot rate after six months

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Reference no: EM132831300

ABC Limited, a company operating in Hungary is a landlocked country in Central Europe, has today effected sales to an Indian FMCG company, the payment being due 6 months from the date of invoice. The invoice amount is 227 lakhs Hungarian Forint (HUF). At today`s spot rate, it is equivalent to Rs. 53.92 lakhs. It is anticipated that the exchange rate will decline by 11% over the 6 months period and in order to protect the HUF payments, the importer proposes to take appropriate action in the foreign exchange market. The 6 months forward rate is presently quoted as 3.91 HUF per rupee. Find -

Problem 1: Expected spot rate after 6 months

a) 3.65 HUF per Rupee
b) 3.50 HUF per Rupee
c) 3.75 HUF per Rupee
d) 3.70 HUF per Rupee

Problem 2: Cost at spot rate after 6 months

a) Rs. 60.50 lakh
b) Rs. 60.53 lakh
c) Rs. 60.58 lakh
d) Rs. 60.63 lakh

Problem 3: Expected exchange loss at spot rate after 6 months

a) Rs. 6.40 lakh
b) Rs. 6.61 lakh
c) Rs. 6.80 lakh
d) Rs. 6.70 lakh

Problem 4: Present cost, if the expected exchange rate risk is hedged by a forward contract

a) Rs. 53.55 lakh
b) Rs. 53.29 lakh
c) Rs. 53.92 lakh
d) Rs. 53.78 lakh

Problem 5: Expected loss, if the expected exchange rate risk is hedged by a forward contract

a) Rs. 4.14 lakh
b) Rs. 4.24 lakh
c) Rs. 4.44 lakh
d) Rs. 4.34 lakh

Reference no: EM132831300

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