The situation
A fixed USD 40,000 invoice is due in 60 days. A matching forward costs ₹84/USD. Consider spot at ₹81 and ₹89.
Your task
Compare cash costs under the forward and under spot.
Reveal step-by-step solution
Set up the problem
Buying USD forward locks ₹33.6 lakh on the assumed settlement date.
Work through the numbers
Spot would cost ₹32.4 lakh at ₹81 or ₹35.6 lakh at ₹89.
Interpret the result
The forward costs ₹1.2 lakh more in the stronger-rupee scenario and saves ₹2.0 lakh in the weaker-rupee scenario. Check settlement terms.
What to remember
A payable requires buying the foreign currency. Confirm quote direction, currency, amount and date.