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Sir please help me. My first question is ,is the premium amount always opposite of contract currency. And my second question is can you please tell me why the premium payable is divided by the spot rate 1.3585, i mean why not the rate 1.3618 has been taken. Thanks
First question: Yes 🙂
Second question: Because the premium is payable in dollars and therefore they need to buy dollars (converting at 1.3618 would mean paying less, which cannot be the case 🙂 )
Hello sir!
Could you please clarify why the premium is payable in dollars? If so,why do we translate it in euros?
Sorry for taking your time.
If you look at the heading on the table given in the question, it specifically says that the premium is quoted in ‘cents per euro’, (and this is usually the case in the exam).
It needs converting to euros because Casasphia Co uses the euro.
Have you watched my free lectures on the managing of foreign exchange risk, because I do deal with this in the lectures.
(And don’t worry about taking my time 🙂 That is what this forum is for 🙂 )
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