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TFFE Math 7

The exporter wants to sell a 120-day usance bill of EUR 65,000 to the bank. To calculate the buying exchange rate: 1) The usance period plus transit is 130 days 2) Interest per euro is calculated as 6% of 113.6872 BDT per euro for 130 days 3) Overhead charge per euro is 0.0625% of 113.6872 BDT 4) The buying exchange rate per euro is the spot rate minus profit, overhead, and interest charges 5) Therefore, the bank must pay the exporter 72,18,445 BDT to purchase the 65,000 euro usance bill.

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Shamima Akter
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531 views

TFFE Math 7

The exporter wants to sell a 120-day usance bill of EUR 65,000 to the bank. To calculate the buying exchange rate: 1) The usance period plus transit is 130 days 2) Interest per euro is calculated as 6% of 113.6872 BDT per euro for 130 days 3) Overhead charge per euro is 0.0625% of 113.6872 BDT 4) The buying exchange rate per euro is the spot rate minus profit, overhead, and interest charges 5) Therefore, the bank must pay the exporter 72,18,445 BDT to purchase the 65,000 euro usance bill.

Uploaded by

Shamima Akter
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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S. M.

Mahruf Billah

Your exporter wants to sell a 120-day usance bill of EUR 65,000.00 to your bank, calculate the
buying exchange rate of your bank. How much does your bank have to pay to the exporter?
Please use the following information:
(96th AIBB May-June 2023)
a) Interbank Exchange rate
EUR 1= USD 1.0715 – 1.0820
USD 1 = BDT 106.1010 – 107.7590
b) Transit period 10 days
c) Profit margin BDT 0.10 per EUR
d) Your bank’s overhead charge 0.0625%
e) Interest rate 6% per annum
(Assume 360 days in a year. Please show your rough calculation)
Solution: The usance of the bill and transit period comes to (120+10=) 130 days.
1 𝐸𝑈𝑅 = 𝐵𝐷𝑇 1.0715 × 106.1010 − 1.0820 × 107.7590
= 𝐵𝐷𝑇 113.6872 − 116.5952

6 × 130 × 113.6872
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑝𝑒𝑟 𝐸𝑢𝑟𝑜 = = 𝐵𝐷𝑇 2.4632
100 × 360

113.6872 × 0.0625
𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝐶ℎ𝑎𝑟𝑔𝑒 𝑝𝑒𝑟 𝐸𝑢𝑟𝑜 = 𝐵𝐷𝑇 ( ) = 0.0710
100
𝑻𝒉𝒆 𝒃𝒖𝒚𝒊𝒏𝒈 𝒆𝒙𝒄𝒉𝒂𝒏𝒈𝒆 𝒓𝒂𝒕𝒆 =
𝑺𝒑𝒐𝒕 𝒃𝒖𝒚𝒊𝒏𝒈 𝒓𝒂𝒕𝒆 − 𝑷𝒓𝒐𝒇𝒊𝒕 𝒎𝒂𝒓𝒈𝒊𝒏 − 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 𝒄𝒉𝒂𝒓𝒈𝒆 − 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕

∴ 𝑇ℎ𝑒 𝑏𝑢𝑦𝑖𝑛𝑔 𝐸𝑥𝑐ℎ𝑎𝑛𝑔𝑒 𝑟𝑎𝑡𝑒 𝑝𝑒𝑟 𝐸𝑢𝑟𝑜 = 𝐵𝐷𝑇(113.6872 − 0.10 − 0.0710 − 2.4632)
= 𝐵𝐷𝑇 111.053
𝑆𝑜, 𝑇ℎ𝑒 𝑏𝑎𝑛𝑘 ℎ𝑎𝑠 𝑡𝑜 𝑝𝑎𝑦 𝑡𝑜 𝑡ℎ𝑒 𝑒𝑥𝑝𝑜𝑟𝑡𝑒𝑟 = 𝐵𝐷𝑇 (65,000 × 111.053) = 𝐵𝐷𝑇 72,18,445

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