TFFE 5th Banking Professional Exam: Math Solution

(10) One of your exporters wants to sell a 60-day usance bill of EUR 2,00,000 to your bank. Calculate the buying exchange rate of your bank using the following information. Also calculate the amount of BDT to be paid by your bank.

(a) Interbank exchange rate : EUR 1 = USD 1·0295 — 1·0455, USD 1 = BDT 121·00 — 122·00 (b) Transit period 10 days (c) Profit margin BDT 0·10 per EUR (d) Bank charge 0·050% (e) Interest rate 13% per annum.

[Assume 360 days in a year. Please show your calculation.]

Solution:

Step 1: Calculate the Cross Buying Rate:

Since the bank is buying EUR from the exporter, we use the buying rates:

EUR 1 = USD 1.0295

USD 1 = BDT 121.00

Therefore,

Cross Buying Rate= 1.0295 × 121.00 = BDT 124.5695 per EUR

Step 2: Calculate the Interest Period:

Total period = Transit period + Usance period = 10 + 60 = 70 days

Step 3: Calculate Interest:

Interest per EUR= 124.5695 × 13% × 70/360 = BDT 3.1488 per EUR

Step 4: Calculate Bank Charge:

Bank charge = 124.5695 × 0.050% = 124.5695 × 0.0005 = BDT 0.0623 per EUR

Step 5: Calculate Buying Exchange Rate:

Buying rate = Cross buying rate − Interest − Profit margin − Bank charge

= 124.5695 − 3.1488 − 0.10 − 0.0623 = BDT 121.2584 per EUR

Therefore, the buying exchange rate of the bank = BDT 121.2584 per EUR.

Step 6: Calculate Amount of BDT to be Paid:

EUR 2,00,000 × BDT 121.2584 = BDT 24,251,680 approximately

Answer:

Buying Exchange Rate = BDT 121.2584 per EUR

Amount payable by the bank = BDT 24,251,680 approximately