question archive A US importer needs to pay 1875000 BDT in 90 days to a Bangladeshi exporter
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A US importer needs to pay 1875000 BDT in 90 days to a Bangladeshi exporter. The US importer is expecting that USD (US Dollars) is going to depreciate from its present level of $1=86.50 BDT to $1=84.75 BDT in 90 days. As a result, the US importer enters into a Non Deliverable Forward (NDF) contract with a bank and fixes $1=85.40 BDT where he will be able to buy BDT at this rate. If the spot rate of USD to BDT depreciates by 1% after 90 days, explain the mechanism of how this NDF contract will work for this US importer in this scenario. (Show all the calculations and steps where necessary) (Word Limit: 150 Words)
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