Question

Q2: (6 Marks) An Omani businessman has just completed transactions in UAE and Saudi Arabia . He is now holding AED 710,000 and SAR 1,210, 000 and wants to convert it to Omani rial (OMR). His currency dealer provides this quotation: Bid Ask SAR/USD 3.7500 - 12 USD/AED 0.2722 - 08 OMR/USD 0.3846 - 04 What are his proceeds from conversions?

Answer 1

AED Held = 710,000 AED

Relevant quotation = OMR / AED

The business man wants to sell AED, so Bid rate is relevant rate. (Bid rate is the rate at which foreign currency can be sold)

Bid OMR / AED = Bid USD / AED x Bid OMR / USD = 0.2722 x 0.3846 = 0.1047

The above quote means that 1 AED = 0.1047 OMR

710,000 AED = 710,000 x 0.1047 = 74,337 OMR

SAR Held = 1,210,000 SAR

Relevant quotation = OMR / SAR

The business man wants to sell SAR, so Bid rate is relevant rate. (Bid rate is the rate at which foreign currency can be sold)

Bid OMR / SAR = Bid USD / SAR x Bid OMR / USD = (1 / 3.7512) x 0.3846 = 0.1025

{Note that :- Bid USD / SAR = 1 / (ASK SAR / USD()

The above quote means that 1 SAR = 0.1025 OMR

1,210,000 SAR = 1,210,000 x 0.1025 = 124,025 OMR

Total OMR proceeds = 74,337 OMR + 124,025 OMR = 198,362 OMR