To calculate the financial impact of this transaction for Alpha Bank, follow these steps:
* Customer Transaction:
* Alpha Bank sells BRL 100 million at a quoted rate of 101 to the customer.
* The customer pays in AUD: BRL100,000,000101=AUD990,099.0099\frac{BRL
100,000,000}{101} = AUD 990,099.0099101BRL100,000,000=AUD990,099.0099.
* Market Transaction:
* Alpha Bank buys BRL 100 million at the market rate of 100.
* The cost in AUD is: BRL100,000,000100=AUD1,000,000\frac{BRL 100,000,000}{100} = AUD
1,000,000100BRL100,000,000=AUD1,000,000.
* Profit Calculation:
* Alpha Bank's profit = Amount received from customer - Cost in the market
* Profit = AUD1,010,000AUD1,000,000=AUD10,000AUD 1,010,000 - AUD 1,000,000 = AUD
10,000AUD1,010,000AUD1,000,000=AUD10,000.
Thus, Alpha Bank makes a profit of AUD 10,000 from this transaction.
ReferencesSource: How Finance Works