Value of imported equipment

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1. One of the Indian trading companies is importing equipment from Germany by paying in EURO. Value of imported equipment is EUR 100,000. The same product will be sold in the local market and invoiced in INR. Ignore company’s profit margin. Find out EUR/INR cross rate for the import payment and load banks profit margin on the final rate and arrive at the rate quoted by the bank to the importer.. Market rates are as follows: Spot rate EUR/USD: 1.1305/10 USD/INR: 67.56/57 Bank will load a profit margin of 0.150% on the final cross rate.

2. A Japanese investor has invested in Australia. His investments in Australia are in AUD. The Japanese investor wants to take back investment from Australia six months later in JPY. Present market rates: USD/JPY: 102.10 AUD/USD: 0.7500 The investor wants your expert guidelines whether to hedge or not to hedge on the basis of following currency trends expected 6 months later a. USD against JPY is expected to appreciate in the coming 6 months b. AUD is expected to depreciate against USD in the coming 6 months You have the choice of booking forward contract either for both the positions (USD/JPY and AUD/USD) or keep one position open or keep both the positions open.

Reference no: EM131354204

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