FINIDEAS HELP CENTER
- Hedging Cost:
- Represents 5% of the total exposure value, amounting to Rs. 5 Lakhs in the given example.
- Futures’ Forwarding Cost:
- Calculated as 5% of the Futures’ exposure, equivalent to 2.5% of the total exposure. For the provided example, it is Rs. 2.5 Lakhs (i.e., 5% of Rs. 50 Lakhs).
- Gross Cost:
- Comprises the sum of Hedging Cost (5%) and Forwarding Cost (2.5%), resulting in 7.5% of the total exposure value. In the given example, this amounts to Rs. 8.5 Lakhs.
- Earning Interest from Debt Funds:
- Yields 7.15% on the debt investment, which is 4% of the total exposure. For instance, the interest-earning on the Rs. 50 Lakhs debt investment is Rs. 4 Lakhs.
- Net Cost (3.5%):
- Computed as Hedging Cost (5%) plus Forwarding Cost (2.5%), minus Interest Earnings (4%). In the provided example, the Net Cost is Rs. 3.5 Lakhs, calculated as Rs. 5 Lakhs (Hedging Cost) plus Rs. 2.5 Lakhs (Forwarding Cost) minus Rs. 5 Lakhs (Interest Earnings).