S. M.

Mahruf Billah

1) You had purchase an export bill for USD 1,00,000 at Tk. 59.1600 the bill was unpaid on
presentation and your customer authorized you to debit the bill amount to his account.
Assuming the US dollar was quoted in the interbank market as under:
Spot USD 1 = TK 58.9500/9700 and you require an exchange margin of 0.15% to be loaded on
the exchange rate, what rate will you quote to your customer to recover your advance against
the bill? What will be the profit or loss to the exporter on this transaction?
Solution:
The customer’s account will be debited at the TT selling rate.
Dollar/Taka interbank selling rate TK. 58.9700
Add: Exchange margin at 0.15% on Tk. 58.9700 + TK 0.0884
TK. 58.8816
Rounded off, the TT selling rate is TK. 58.8800
Amount paid to the customer on purchase of the bill for USD 1,00,000 at TK. 58.880 is
TK. 58,88,000

Amount debited to his account on return of bill at TK. 59.1600 = TK. 59,16,000
Profit to the exporter = TK. (59,16,000 – 58,88,000) = TK. 28,000.00
2) You had negotiated ‘at sight’ bill under an irrevocable letter of credit for USD 1,00,000 at TK.
59.5200 and covered yourself by sale in the market for one month forward delivery at TK.
59.5500. However, it was found later that terms of LC had not been compiled with and that
you had to recover your advance from your customer and cover your sale in the interbank
market at TK. 59.6000. The interbank rates for dollar were under:
Spot USD 1 TK. 59.5225/5275
One month TK. 59.5800/5875

The merchant rates for dollar were as follows:

TT USD 1 TK. 59.4800/59.5600
One month TK. 59.5200/59.6200
a) At what rate will you cancel your purchase contract from the customer?
b) What will be the taka equivalent you will recover from the customer?
c) What will be the profit/loss to the customer on the transaction?

Solution:
The purchase contract will be cancelled at one month forward TT selling rate prevailing on the
date of Cancellation, viz., TK. 59.6200 (It may be noted that the bank covers the cancellation by
buying one month forward in the market).
Amount paid to customer on purchase of bill for
USD 1,00,000 at Tk. 59.5200 TK. 59,52,000
Amount received from customer on cancellation of contract
At TK. 59.6200 TK. 59,62,000
 S. M. Mahruf Billah

Loss to the customer on Cancellation TK. 10,000

3) An exporter received an advance remittance of Danish Kroner 1,00,000 by Telegraphic
Transfer. He likes to retain 15% of the remittance in foreign currency. In the interbank market
dollar was quoted at:
Spot USD 1 = TK. 42.3500/3600
1 month forward 1100/1200
At Singapur market, Danisk Kroner was quoted as under:
Spot USD 1= DKR 7.9220/9280
1 month forward 40/45

The bank requires an exchange margin of 0.08%. What rate will be quoted to the customer?
What is the taka amount payable to him?
Solution:
The bank has to quote TT buying rate to the customer.
Dollar/Taka spot buying rate TK 49.35000
Less: Exchange margin at 0.08% on TK. 42.35000 -TK 0.03388
TT Buying rate per dollar TK 49.31612
Dollar/Kroner spot selling rate DKR 7.92800
TT Buying rate for Kroner = (49.31052/7.92800) TK 6.2198
Rounded off to the nearest multiple of 0.0025, the rate quoted to the customer would be TK.
6.2200 per Kroner. Amount paid to customer for DKR 85,000 at TK. 5,28,700.
4) Your export customer requests you to quote him a rate for purchase of Singapore Dollar
1,00,000. Assuming US dollar in the interbank market as under:
Spot USD 1= TK 49.5500/5600
1 month forward 49.3500/3600
2 months forward 49.0500/0600
3 months forward 48.7600/7700
And Singapore dollars are quoted in Singapore market as under:
Spot USD 1= SGD 1.8220/8340
1 month forward 0.0040/0.0045
2 months forward 0.0060/0.0065
3 months forward 0.0080/0.0085
What will be the rate quoted to the customer? Also calculate the taka amount payable to him
and the interest to be recovered. Notes: 1) Transit period is 25 days. 2) Exchange margin to be
included in the rate is 0.10%. 3) Interest to be recovered at 10%.
Solution:
The bank has to quote bill buying rate to the customer. Dollar is at discount against taka. Since
this is a buying rate, the transit period will be rounded off to the higher month and one month
forward dollar/taka buying rate will be taken.
Dollar/Taka one month forward buying rate TK 49.3500
 S. M. Mahruf Billah

Less: Exchange margin at 0.10% on TK 49.3500 -TK 0.04935

Bill Buying rate for dollar TK. 49.30065
US dollar is at premium against Singapore dollar. Since this is a selling rate, the transit period will
be rounded off to this is a selling rate, the transit period will be rounded off to the higher month
and one month forward US dollar/Singapore dollar selling rate will be taken.

US dollar/Singapore dollar spot selling rate SGD 1.8340

Add: Premium for one month + SGD 0.0045
= SGD 1.8385
Bill buying rate for Singapore dollar (49.30065 ÷ 1.8385) TK 26.8157

Rounded off to the nearest multiple of 0.0025, the rate quoted to the customer would be TK.
26.8150 per Singapore dollar.
Amount payable to customer on purchase of bill for SGD 1,00,000 at TK. 26.8150 a dollar is TK.
26,81,500
Interest to be recovered at 10% for 25 days on TK 26,81,500
26 , 81,500× 25 ×10
¿ =TK . 18,366.43
100 ×365
5) Your customer has requested you to purchase a 30 day sight bill for Swiss Francs 5,00,000.00
Assuming Taka/US dollars are quoted in the local interbank market as under:
Spot USD 1 Tk. 49.2800/2875
One month forward 1700/1750
Two month forward 3500/3550
Three month forward 5500/5550

And Swiss Francs are quoted in Singapore market as under:

Spot USD 1 = CHF 1.4250/4375
1 month forward 50/55
2 months forward 105/110
3 months forward 155/160
What rate will you quote to your customer provided you require an exchange margin of 0.10%
bearing in mind the following:
i) Transit period for bills = 25 days
ii) Rate of interest = 10% p.a., and
iii) Commission on export bill is TK. 500?
Also show that net amount payable to the customer. Taka amount should quoted nearest to the
whole taka.
Solution:
The usance of the bill and transit period comes to 55 days. In the Dollar/Taka leg, forward dollar
is at premium. In this case, since dollar buying rate is reckoned, 55 days will be rounded off to
lower period, viz. one month.
 S. M. Mahruf Billah

Dollar/taka market spot buying rate Tk. 49.28000

Add: Premium for one month + TK. 0.17000
TK. 49.45000
Less: Exchange margin at 0.10% on Tk. 49.4500 -TK 0.04945
Bill buying rate for dollar TK. 49.40055
In the Dollar/Swiss francs quote dollar is at premium in this case since dollar selling rate is taken
55 days will be rounded off to higher period, i.e., 2 months.

Dollar/franc (market) spot selling rate CHF 1.4375

Add: Premium for two months +CHF 0.0110
CHF 1.4485
Bill buying rate for Swiss Franc (49.40055 ÷ 1.4485) = TK. 34.1046
Rounded off to the nearest multiple of 0.0025, the rate quoted to the customer would be TK.
34.1050 per Swiss Franc.
Amount payable to customer for CHF 5,00,000 at Tk. 34.1050 per franc is TK. 1,70,52,500
Interest recoverable at 10% for 55 days on Tk. 1,70,52,500 is 2,56,955.

Net amount credited to customer’s account:

Value of bill TK. 1,70,52,500
Less: Interest Tk. 2,56,955
Commission TK. 500
Net amount Credited = TK. 1,67,95,045

6) On 17th July US Dollar is quoted in the interbank market as follows:

Spot USD 1= TK. 48.6025/6100
Spot/July 500/600
Spot/August 500/1600

At Singapore, Malaysian Ringits are quoted as follows:

Spot USD 1= MYR 3.8012/59
1 month 24/26
2 months 48/50

The bank requires exchange margin of 0.10% on TT selling and 0.15% on bills selling.
i) Mr. M Kabir requests for a bank draft of MYR 5,000
ii) M/S Hightech Ltd. Desire to retire an import bill for MYR 15,000
Calculate the exchange rate to be quoted by the bank in each of the above cases.
Solution:
First we calculate the selling rate for US dollar.
Dollar/Taka market spot selling rate Tk. 48.6100
Add: Exchange margin at 0.10% on TK. 48.6100 + TK. 0.0486
 S. M. Mahruf Billah

TT Selling rate for Dollar TK. 48.6586

Add: Exchange margin at 0.15% on TK. 48.6586 +TK 0.0730
BC Selling rate for Dollar TK. 48.7316

i) TT selling rate for Malaysian Ringit

Dollar/Taka TT selling rate TK. 48.6586
Dollar/Ringit spot buying rate MYR 3.8012
Ringit/Taka TT Selling rate (48.7316÷ 3.8012) TK. 12.8009
Rounding off to the nearest multiple of 0.0025, the bank will quote a rate of TK. 12.8000 for
issue of demand draft.

ii) Bill selling rate for Malaysian Ringit

Dollar/Taka Bill Selling rate TK. 48.7316
Dollar/Ringit spot buying rate MYR 3.8012
Ringit/Taka spot buying rate (48.7316÷ 3.8012) TK. 12.8201

Rounding off to the nearest multiple of 0.0025, the bank will quote a rate of TK. 12.8200 for
retiring the import bill.

7) Euro is quoted in Singapore as under:

Spot EUR 1= USD 0.9725/850
1 month forward 0.0050/0.0075
In the interbank market, US dollar is quoted as under:
Spot USD 1= TK. 49.125/1375
1 month forward 6000/6100

You are required to load an exchange margin of 0.15% in the exchange rate for TT selling and
0.20% for bill selling.
a) A shipping company has asked you to quote your spot TT selling rate for a freight
remittance of EUR 1,50,000 to Frankfurt.
b) Another customer requires you to retire an import bill drawn on him for EUR 12,000.
What rate(s) will you quote to your customer?
Solution:
Dollar/Taka market spot selling rate TK. 49.13750
Add: Exchange margin at 0.15% on TK. 49.13750 +TK. 0.07371
TT selling rate for dollar TK 49.21121
Add: Exchange margin at 0.20% on TK. 49.21121 + TK. 0.09842
Bill selling rate for dollar TK. 49.30963

Euro/Dollar market spot selling rate = USD 0.0850

a) TT selling rate for euro (49.21121×0.9850) = TK. 48.4730
Rounded off to the nearest multiple of 0.0025, the rate quoted to the shipping company for
issue of DD is TK. 49.4725 a euro.
 S. M. Mahruf Billah

b) Bills selling rate for euro (49.30963×0.9850) = TK. 48.5670

Rounded off to the nearest multiple of 0.0025, the rate quoted to the import customer is TK.
48.5675

8) From the following information you are required to calculate a) ready bill buying rate b) 2
months forward buying rate for demand bill c) ready rate for 60 days usance bill and d) 2
months forward buying rate for 60 days usance bill.
Interbank rate US dollar:
Spot USD 1= TK. 48.6000/6075
1 month 3500/3600
2 months 5500/5600
3 months 8500/8600
4 months 1.1590/1.1600
5 months 1.3500/1.3600
6 months 1.5500/1.6600

Transit period is 25 days. All forward rates are for fixed delivery. Exchange margin is 0.10%
Solution:
a) Ready buying rate
Dollar/Taka market spot buying rate = TK. 48.6000
Less: Exchange margin at 0.10% on TK. 48.6000 -TK. 0.04860
= Tk. 48.55140
Rounded off the nearest multiple of 0.0025, the rate quoted for ready bill buying is TK. 48.5525
b) 2 months forward buying rate
Dollar/Taka (market) spot buying rate TK. 48.6000
Add: Forward premium for 2 months
(Transit period 25 days and forward period 2 months,
Rounded off to lower month) +Tk. 0.5500
+ 49.15000
Less: Exchange margin at 0.10% on TK. 49.1500 -TK. 0.04915
TK. 49.10085
Rounded off, the rate quoted for 2 months forward purchase of dollar bill is TK. 49.1000
c) Ready rate for 60 days usance bill
Dollar/Taka (market) spot buying rate TK. 48.6000
Add: Forward premium for 2 months
(Transit period 25 days and forward period
2 months, rounded off to lower month) +TK. 0.55000
TK 49.15000
 S. M. Mahruf Billah

Less: Exchange margin at 0.10% on TK. 49.1500 TK. 0.04915

TK. 49.10085
Rounded off, the rate quoted for ready purchase of 60 days usance dollar bill is TK. 40.1000
d) 2 months forward rate for 60 days bill
Dollar/Taka (market) spot buying rate TK. 48.6000
Add: Forawrd premium for 4 months
(Transit period 25 days and forward period
2 months, rounded off to lower month) + TK. 1.15000
TK 49.75000
Less: Exchange margin at 0.10% on TK. 49.7500 -Tk. 0.04975
TK. 49.70025
Rounded off, the rate quoted for 2 months forward purchase of 60 days usance dollar bill
is TK. 49.700
9) Your export-customer requests you on 15 th July to book a foreign exchange contract delivery
September covering 30 days sight bill on New York under an irrevocable letter of credit for
USD 65,000. Assuming US dollars are quoted in the local interbank market as under:
Spot USD 1 = TK. 49.5675/5750
Spot/July 800/900
Spot/August 1700/1800
Spot/September 2250/2325
Spot/October 3200/3300
Spot/November 4100/4200
Spot/December 5150/5250
What rate will you quote to your customer bearing in mind the following factors: Exchange
margin 0.10%; Transit period 25 days?
Solution:
Dollar is at premium. The rule is to take the earliest delivery. The option to the customer is over
September. Taking earliest delivery, the date of delivery will be taken as 1 st September. The
usance of the bill 30 days and transit period of 25 days will work out to 24 th October as the
probable date of the bank acquiring foreign exchange. This will be rounded off to the lower
month, and the rate to the customer will be based on Spot/September buying rate in the
interbank market.
Dollar/Taka spot interbank buying rate TK. 49.56750
Add: Premium for September +TK. 0.22500
TK. 49.79250
Less: Exchange margin at 0.10% on TK. 49.7925 -TK. 0.04979
TK. 49.74271
Rounded off, the rate quoted to the customer would be TK. 49.7425
 S. M. Mahruf Billah

10) An Import-customer of your bank wishes to book a forward contract with you on 2 nd August,
1999 for sale to him of USD 1,50,000 delivery full November 2004. The spot rates on 2 nd
August, 2000 are USD/Tk. 49.3700/3800 and the swap points are:
USD/TK
Spot/ August 0300/0400
Spot/September 1100/1300
Spot/October 1900/2200
Spot/November 2700/3100
Spot/December 3500/4000
Calculate the rates to be quoted to the customer keeping an exchange margin of 5 paisa.
Solution:
The rate to the customer will be based on Spot/November rate in the market.

Dollar/Taka spot selling rate TK 49.3800

Add: Premium for Spot/November +TK 0.3100
TK 49.6900
Add: Exchange margin + TK 0.0500
TK 49.7400

The selling rate of US dollar delivery full November is TK 49.7400 per dollar.
11) Your exporter-customer has requested you to book a fixed date TT forward contract for Swiss
Francs 5,00,000 in respect of an export bill due for payment 180 days from the date of the
contract. Assuming you cover yourself by sale of Swiss Francs in London market for the
corresponding delivery date when the exchange rates for Swiss Francs were as under:
Spot USD 1= CHF 1.6120/6165
One month 60/58
Three months 165/160
Six months 330/320
And US dollars are quoted in the local interbank market as under:
Spot USD 1= TK 48.4025/4175
One month forward 48.6550/6725
Three months forward 48.8550/8750
Six months forward 49.2550/2800
Calculate the exchange rate and the taka amount payable to the customer bearing in mind the
following:
(i) An exchange margin rate of 0.08% is required.
(ii) Taka equivalent to be nearest to the whole taka.
Solution:
The bank has to quote forward TT buying rate for Franc with fixed delivery 180 days from the
date of contract.
Dollar/Taka six months forward buying rate =TK 49.2550
 S. M. Mahruf Billah

Less: Exchange margin at 0.08% on TK 49.2250 - TK 0.0394

Forward buying rate for dollar = TK 49.2156
Dollar/Franc spot selling rate = CHF 1.6165
Less: Discount for 6 months - CHF 0.0320
= CHF 1.5845
Forward TT buying rate for Franc (48.2156/1.5845) = TK 31.0607
Amount payable on realization of the bill for CHF 5,00,000 at TK 31.0600 is
TK 1,55,30,000