In an automatic cancellation sum the bank charges from the customer swap loss, perfect understood the logic that the bank has to incur this loss as the customer didn’t appear on the due date but the main question is why the bank is not charging the customer the whole net outflow , it has incurred in buying at the covered rate and selling at the spot rate ,but only interest is being charged on it why bank is bearing that amount itself.
I know that’s sir has told that we already compare spot selling with the forward buy contract which we as bank enter so we can’t compare same figure twice with different rates and calculate two losses but my question again arises that then how come bank recovers its net outflow because it just charges interest from the customer..
I PURCHASE A SHARE AT 300 AT T=0, FURTHUR PURCHASE AT 350 AT T=1. I THEN SELL OFF A SHARE AT 320 AT T=2 AND THEN AT T=3, SELL AGAIN AT 360. PLS CALCULATE OVERALL PROFIT AND I WILL EXPLAIN TO U WHAT U R ASKING.
Sir overall it’s a profit of 30
I explained even in class that you cannot do double counting.
Suppose ou are into trading stocks…you buy at 50, sell at 65 then once agin buy at 70 and sell at 75.
So what is the overall profit?
Method 1: Make pairs of the first two and last two…you get 15+5=20
Method 2: Make pairs of the first buy price and the last sell price
and then make another pair of the second buy price and the first sell price
It comes to 25-5=20
Apply the same logic in automatic cancellation