UTS Company in India imports Laptop equipment from JIC Company in the USA. There is an
outstanding invoice of $1,000,000 to be paid in two months. The USD-to-INR rate when the
transaction was done was 47.5. Now the USD-to-INR rate has changed from 47.5 to 40.5. Ram, who
is a treasury analyst at UTS Company, reviews the transactions and comes to a conclusion. Select
two correct conclusions arrived upon by Ram. (Choose two.)

A. JIC Company is not impacted at all by this rate change.
B. JIC Company has a positive impact by this rate change.
C. UTS Company is not impacted at all by this rate change.
D. UTS Company has a positive impact by this rate change.

Had hard time to understand why the answers are A D.. Hansan can you explain this

Just my thoughts...
A & D are correct.
A) because the seller JIC Company is expecting $1M USD no matter what the exchange rate is.
D) because initially the transaction was at a rate of 47.5 INR : 1 USD...
Later when it's time to make the payment, the rate has dropped to 40.5 INR : 1 USD
That means that the UTS Company does NOT need to spend as much of its own currency to purchase 1M USD.
Hence, they are GAINING $$$$ by spending LESS to generate a 1M USD payment to JIC Company.
.
Hope this makes sense :)

Sincerly,
Charlie :)

Thanks for your clarification charlie..

Hi Sarkar,
I also agree with Charlie. But also note that Revaluetion deals with unrealized gains and loss using the exchange rate at month end while the realized gains and loss is bases on daily rate rate at payment date.
But this is a certification exam question which I don't know if it should be entertained on this type of forumn.
Regards