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    Foreign Exchange Individual

    Uploaded by

    pavie raja
    The document provides sample exchange rate quotes for a Malaysian importer paying in Singapore dollars and an exporter receiving proceeds in SGD. It also discusses how banks determine buying rates for travelers checks, telegraphic transfers, and on-demand drafts. Finally, it works through an example of purchasing a travelers check in Malaysian ringgit using different buying rates.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Foreign Exchange Individual

    Uploaded by

    pavie raja
    347 views4 pages
    The document provides sample exchange rate quotes for a Malaysian importer paying in Singapore dollars and an exporter receiving proceeds in SGD. It also discusses how banks determine buying rates for travelers checks, telegraphic transfers, and on-demand drafts. Finally, it works through an example of purchasing a travelers check in Malaysian ringgit using different buying rates.

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    treasury

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    The document provides sample exchange rate quotes for a Malaysian importer paying in Singapore dollars and an exporter receiving proceeds in SGD. It also discusses how banks determine buying rates for travelers checks, telegraphic transfers, and on-demand drafts. Finally, it works through an example of purchasing a travelers check in Malaysian ringgit using different buying rates.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    347 views4 pages

    Foreign Exchange Individual

    Uploaded by

    pavie raja
    The document provides sample exchange rate quotes for a Malaysian importer paying in Singapore dollars and an exporter receiving proceeds in SGD. It also discusses how banks determine buying rates for travelers checks, telegraphic transfers, and on-demand drafts. Finally, it works through an example of purchasing a travelers check in Malaysian ringgit using different buying rates.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    Question 1

    Bid Rate Offer Rate

    USD/MYR 3.1990 3.2010

    USD/SGD 1.6280 1.6300

    i. What is your quote if you are an executive with CIMB Bank, Changlun and a local
    importer asks for an exchange rate to pay for his purchases from Singapore?
    a) Show the logical steps to arrive at your answer. (3
    marks)

    Bank buy USD 3.2010


    Bank sell USD 1.6280

    b) Calculate the exchange rate using the cross-rate formula. (3


    marks)

    SGD 1.0 = 3.2010


    1.6280
    = 1.9662

    c) Calculate the exchange rate using the chain rule.


    (3marks)

    Using the Chain Rule,


    SGD 1.0 = 3.2010
    1.6280
    = 1.9662
    ii. How do you quote to a Malaysian exporter who wishes to convert his export proceeds
    in SGD into MYR?

    a) Show the logical steps to arrive at your answer. (3


    marks)

    Using USD/SGD – Steps 1 (Bank buy USD at 1.6300)


    Steps 2 (Bank sell USD at RM3.1990)

    b) Calculate the exchange rate using the cross-rate formula. (3


    marks)

    SGD 1.0 = 3.1990


    1.6300
    = 1.9625

    c) Calculate the exchange rate using the chain rule. (3


    marks)

    Using chain rule, SGD 1.0 = 3.1990


    1.6300
    = 1.9625

    Question 2

    A bank normally displays its official foreign exchange rates in three columns namely, the
    Selling TT/OD rate, the Buying TT rate and the Buying OD rate. Describe under what
    situations a bank would use the TT buying rate and the OD buying rate when it purchases
    foreign exchange from its customers.

    i. TT Buying Rate (3
    marks)
    Bank will use buying TT rate from customers who have received TTs from overseas,
    or for exporters who receive documentary credits allowing reimbursement by TTs (or
    people receiving money from overseas applicable for exporters).

    ii. OD Buying Rate (3


    marks)

    Bank use OD buying rate from clients who receives checks or drafts from overseas or
    exporters who receive documentary credits calling for reimbursements at sight or
    travellers presenting travellers’ checks. (applicable for exporters, people receiving
    money from overseas, or travellers).

    Question 3

    A customer of your bank presented to you a traveller cheque issued by ANZ Bank,
    Melbourne, Australia amounting to AUD1,800.00. The customer would like to receive
    immediate payment in MYR and requested your bank to purchase the cheque. Your bank’s
    counter rates for the day is as follows:

    (MYR to 1 unit of Foreign Currency) Selling TT/OD Buying TT Buying OD

    USD 3.2240 3.1450 3.1350

    AUD 3.0480 2.9720 2.9560


    i. Given the above counter rates, at what rate would you purchase the travelers’ cheque
    and how much MYR would the customer receive? (2
    marks)

    AUD 1.00 = RM 2.9560


    AUD 1,800 x RM2.9560 = RM5,320.80

    ii. Suppose the Australian dollar interest rate is 4.0% and a total en-route period of 14
    days is required before the bank gets is reimbursement. Compute your breakeven cost
    for buying the draft from the customer? (2
    marks)

    Cost of OD = 2.9720 x 14 days


    365 x 100
    = 45 pip points
    Actual cost = 2.9720 – 0.0045
    = 2.9675

    iii. How much MYR would the customer receive if the transaction was made by inward
    telegraphic transfer instead of traveller’s cheque? Assume no margin and no other
    bank charges are imposed. (2
    marks)

    = AUD 1,800.00 x 2.9720


    = RM 5,349.60

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