On July 28, 2008 Unicon (an importer) requested a bank to remit Singapore Dollar (SGD) 2,50,000 under an irrevocable LC. However, due to bank strikes, the bank could effect the remittance only on August 4, 2008. The interbank market rates were as follows:
The bank wishes to retain an exchange margin of 0.125%. How much does the customer stand to gain or lose due to the delay?
Solution
On July 28, 2008 the importer customer requested to remit SGD 2,50,000 .
Too consider sell rate for the bank:
US$ = Rs. 45.90
Pound 1 = US$ 1.7850
Pound 1 = SGD 3.1575
Therefore, SGD 1 = 45.90 x $1.7850/SGD 3.1575
SGD 1 = Rs. 25.9482
Add: Exchange margin (0.125%) Rs. 0.0324
Rs. 25.9806
On August 4, 2008 the rates are
US$ = Rs. 45.97
Pound 1 = US$ 1.7775
Pound 1 = SGD 3.1380
Therefore SGD 1 = 45.97 x $ 1.7775 / SGD 3.1380
SGD 1 = Rs. 26.0394
Add: Exchange margin (0.125%) Rs. 0.0325
Rs. 26.0719
Hence, loss to the importer
= SGD 2,50,000 (Rs.26.0719 – Rs.25.9806)
= Rs. 22,825
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