46. It is Tuesday, 27 March 201X, and an Australian importing company has to pay
ID: 1172354 • Letter: 4
Question
46.
It is Tuesday, 27 March 201X, and an Australian importing company has to pay a US exporter USD 75 000 within the next six weeks. The company enters into a forward exchange contract with an FX dealer for ‘one month forward delivery' of USD. On what date will value settlement occur?
A.
29 March 201X
B.
27 April 201X
C.
29 April 201X
D.
30 April 201X
46.
It is Tuesday, 27 March 201X, and an Australian importing company has to pay a US exporter USD 75 000 within the next six weeks. The company enters into a forward exchange contract with an FX dealer for ‘one month forward delivery' of USD. On what date will value settlement occur?
A.
29 March 201X
B.
27 April 201X
C.
29 April 201X
D.
30 April 201X
Explanation / Answer
Ans: 27 April 201X.
Settelment of Forward contracts: A currency forward contract locks the exchange rate for the future currency exchange at a prespecifeid date. The forward contract matures on the exact date determined in the contract. There is no such provisions like T+1 or T+2 settelments. Here in the above case, there is a one month forward contract which is entered on 27th march 201X. Since it is an one mothe forward contract it will mature on the date which due on exact one moth later i.e 27th of April.
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