TFFE 97th Banking Professional Exam: Math Solution

10 (a) Your importer wants to book for a payment of 90-day LC amount of EUR 25,000.00 to your bank. Calculate the exchange rate to deal with the import payment. How much does the importer have to pay to your bank?

Please use the following information: (i) Inter-bank exchange rate: USD 1 = BDT 109.5000—110.5000, EUR 1 = USD 1.0750—1.0770 (ii) Your bank’s overhand charge 0.0831% (iii) Interest (or swap) cost 3.0% per annum (iv) Assume 360 days in a year.

Step 1: Calculate Cross Selling Rate

Since the bank is selling EUR to the importer, the higher (selling) side of both exchange rates will be used.

Cross Selling Rate = EUR Selling Rate × USD Selling Rate = 1.0770 × 110.5000 = BDT 119.0085 per EUR

Step 2: Add Interest (Swap Cost)

Interest = 119.0085 × 3% × (90/360) = 119.0085 × 0.03 × 0.25 = BDT 0.8926 per EUR

Rate after Interest = 119.0085 + 0.8926 = BDT 119.9011 per EUR

Step 3: Add Bank Overhead Charge

Overhead = 119.9011 × 0.0831% = 119.9011 × 0.000831 = BDT 0.0996 per EUR

Final Selling Rate = 119.9011 + 0.0996 = BDT 120.0007 per EUR ≈ BDT 120.00 per EUR

Step 4: Calculate Amount Payable

Amount = EUR 25,000 × BDT 120.0007 = BDT 30,00,018 (Approx.)

Answer: Exchange Rate = BDT 120.0007 per EUR (≈ BDT 120.00), Amount Payable = BDT 30,00,018 (Approx.)

(b) Calculate the buying and selling rate of Japanese Yen (JPY) in BDT when inter-bank market exchange rates are:

USD 1 = BDT 109.5000—110.5000, USD 1 = JPY 145.3947—146.0000 (N. B.: Please show your rough calculation).

Solution:

Step 1: Buying Rate

Buying Rate = 109.5000 ÷ 146.0000 = BDT 0.7500 per JPY = BDT 75.00 per 100 JPY

Step 2: Selling Rate

Selling Rate = 110.5000 ÷ 145.3947 = BDT 0.7600 per JPY = BDT 76.00 per 100 JPY

Answer:  Buying Rate = BDT 75.00 per 100 JPY, Selling Rate = BDT 76.00 per 100 JPY