On 1st October, 2024 Mr. G, an exporter, enters into a forward contract with a Bank to sell USD 1,00,000 on 31st December 2024 at INR/USD 85.40.…

(i) If Bank agrees to take early delivery- Working Notes - (1) Swap Difference Particulars ₹ Bank Sells at Spot Rate on 30 th November 2024 85.22 Bank Buys at Forward Rate of 31 st December 2024 (85.27 + 0.15) 85.42 Swap loss per US$ -0.20 Swap loss for US$ 1,00,000 (1,00,000 x -0.20) 20,000 (2) Interest on Outlay Funds Particulars ₹ On 30 th November Bank sells at 85.22 It buys from customer at 85.40 Outlay of Funds per US$ 0.18 Interest on Outlay fund for US$ 1,00,000 for 31 days (US$100000 x 0.18 x 31/365 x 18%) 275.18 (3) Charges for early delivery Particulars ₹ Swap loss 20,000.00 Interest on Outlay fund for US$ 1,00,000 for 31 days 275.18 Total charges of early delivery 20,275.18 Net Inflow to Mr. G Particulars ₹ Amount received on sale (85.40 x 1,00,000) 85,40,000.00 Less: Charges for early delivery payable to bank 20,275.18 Net Inflow to Mr. G as on 30 th November 2024 85,19,724.82 (ii) If Mr. G deploys these funds in US$, then inflow will be - Receipt of US$ on 30 th November 2024 US$ 1,00,000 Add: Interest for 31 Days (1,00,000×3%×31/365) US$ 254.79 US$ available on 31 st December 2024 for sale US$ 1,00,254.79 Particulars ₹ Sale of US$ 1,00,000 to bank as per agreed rate (85.40) 85,40,000.00 Sale of US$ 254.79 @85.32 i.e. Forward Rate 21,738.68 Amount of Inflows 85,61,738.68 If Mr. G deploys funds received in INR from Bank in term deposit then amount of inflows on 31 st December 2025 will be - Particulars ₹ Net Inflow to Mr. G as on 30 th November 2024 85,19,724.82 Add: Opportunity Interest for 31 Days (85,19,724.82×12%×31/365) 86,831.17 US$ available on 31 st December 2024 for sale 86,06,555.99 Advice: In case if opportunity to invest funds in INR is available at term deposit rate then Mr. G should deliver the USD to the Bank 30 th November and invest the INR funds.