Forward Exchange Rate Quotes

For example, Ms. Sweta from UK invests GBP 100,000 in an FCNR deposit on July 15, 2014 (1 GBP=100 INR) for 5 years at a rate so that the deposit has a maturity amount of GBP 120,000 on July 15, 2019 and simultaneously, enters a forward contract to convert the maturity amount (Sell GBP) at INR 125/GBP i.e. INR 15,000,000. Sweta’s investment of 10,000,000 INR becomes 15,000,000 INR giving her a simple average return of 10%. It will not matter whether the foreign exchange on July 15, 2019 is INR 110/GBP or INR 150/GBP; she would still get 15,000,000 on maturity.

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