Question

Two months ago, you decided to purchase 500,000 pounds at a spot rate of £=$1.045-60. You sold all of your pounds today at the going spot rate of $= £.965-74. Find your profit/loss in terms of dollars. Round intermediate steps to four decimals.



4031.10


-16,652.98


15,301.89


-11865.29

Answer 1

Ans. -11865.29

Following is the solution:

Sale rate at the time of sale in $ = £ 0.965

We will convert $ rate given above in £ rate

i) £ rate for sale = 1 / $ rate = 1 / £0.965 = $1.0363

and

ii) £ rate for purchase = $1.0600

Total profit/loss in terms of $ = ( Sales rate in £ - purchase rate in £) * Amount in £

Total profit/loss in $ = ($1.0363 - $1.0600) * £500000 = -$11865.29

Note: Decimals are rounded off and due to which above ans may differ.

Explanation for selected rates in Ans. :

Rate £ = $1.045 - 60, here two rates are given which is to be read as $1.045 and 1.060.

Here, always 1st rate is sales rate and 2nd rate is purchase rate to be taken for individual point of view other than banker.

So using the above concept, purchase and sales rates are selected in the solution.