Question

You work as a manager in a reputed bank in the capital Nairobi. One of your good customers, Mr. Uweni receives and makes payments in foreign currency. In a cool Wednesday morning, you have; through swift, received various transfers on his behalf as detailed below:

PAYMENTS RECEIPTS

TZ SH (TZS)                                          8,600,000         Uganda Shillings (UGS)                         10,300,900

Euro                                                             8,900             Egyptian pound (EP)                                  72,600

JPY                                                           1,800,000            Kuwait Dinar (KD)                                       9,100

US Dollars (USD)                                         6,800              Qatar Riyal (QR)                                          50,900

Your bank’s rate board today shows the following spot rates. (KSH = Kenyan Shillings)

USD/KSH       101.890      101.245   

KSH/TZS           22.97     23.112

EURO/KSH     114.682   115.742    

KSH/UGS     36.550   36.952

JPY/KSH      0.9200    0.9218

USD/EP        8.270        8.871

USD/KD       0.3890    0.4210

USD/QR        7.995   8.823

REQUIRED

Determine the net amount to be credited or debited to Mr Uweni’s account. Include exchange commission of ¹/2 %, Maximum KSH 10,000

Answer 1

As given in the question, The conversion rate for payment calculations are as follows:

1 KSH = TZS 22.97 - 23.112	1 TZS = KSH 0.04327 - 0.04354
1 Euro = KSH 114.682 - 115.742
1 JPY = KSH 0.9200 - 0.9218
1 USD = KSH 101.245 - 101.890

As we are purchasing these currencies, Bank will sell it at a higher rate. Thus, the higher rate is the conversion rate in payment.

Payment Details
Currency	Payment	Conversion Rate	KSH	Commission	Total Payment
TZS	(8,600,000.00)	0.04354	(374,444.00)	(1,872.22)	(376,316.22)
Euro	(8,900.00)	115.742	(1,030,103.80)	(5,150.52)	(1,035,254.32)
JPY	(1,800,000.00)	0.9218	(1,659,240.00)	(8,296.20)	(1,667,536.20)
USD	(6,800.00)	101.89	(692,852.00)	(3,464.26)	(696,316.26)
			Total		(3,775,423.00)

Conversion rate required for Receipt

1 UGS = KHS	0.02714	0.02736
1 EP= USD	0.11273	0.12092
1KD = USD	2.37530	2.57069
1QR = USD	0.11334	0.12508
1 USD = KSH	101.245	101.89

Now in case, we receive foreign currency and we go to the bank and want to sell it. Then the Bank will pay us the lower amount. That's why lower conversion rate is taken in case of receipts.

Receipts Details
Currency	Receipt	Conversion Rate	USD	Conversion rate of USD	KSH	Commission	Total Payment
UGS	10,300,900.00	0.02714			279,566.43	1,397.83	278,168.59
EP	72,600.00	0.11273	8184.198	101.245	828,609.13	4,143.05	824,466.08
KD	9,100.00	2.3753	21615.23	101.245	2,188,433.96	10,000.00	2,178,433.96
QR	50,900.00	0.11334	5769.006	101.245	584,083.01	2,920.42	581,162.60
					Total		3,862,231.23

NET RECEIPT = KSP 3,862,231 -  3,775,423 = KSP 86,808 to be credited to Mr Uweni’s account

I hope it will help you in the study.

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Thank You!