The situation
An importer owes USD 100,000. It locks 60% at ₹85/USD. Test maturity spot of ₹90 and ignore fees.
Your task
What is the blended payment and the saving against no hedge?
Reveal step-by-step solution
Set up the problem
Hedged cost = 60,000 × ₹85 = ₹51 lakh. Unhedged cost = 40,000 × ₹90 = ₹36 lakh.
Work through the numbers
Total is ₹87 lakh, equivalent to ₹87/USD. Unhedged total would be ₹90 lakh.
Interpret the result
The forward saves ₹3 lakh in this scenario. The remaining USD 40,000 still moves with spot.
What to remember
Define the exposure and covered notional in the same currency and match the settlement date.