They used 4,000,000 Indian rupees for their calculation as opposed to the 8,000,000 in the question. I swear I spent about 10 minutes on this calculation…, cuz I couldn’t believe I was getting the wrong answer. I just guessed B to be the answer, but it seems like the 8,000,000 might have been a typo. ------------------------- A Hong Kong company needs to pay one of its suppliers 8,000,000 Indian rupees 90 days from now. The company is worried that rupees will appreciate during this time and decides to partially hedge its exchange rate risk by entering a contract to purchase half of the rupees 90 days into the future for a price of 5.9364 INR/HKD. The current exchange rate is 5.7921 INR/HKD. 90 days later, the exchange rate is 5.8764 INR/HKD. What is the gain/loss of entering this forward contract? A) −6,880 HKD. B) 6,880 HKD. C) 9,906 HKD. Your answer: B was correct. By entering into the forward contract, the company gained [(4,000,000 / 5.9364) − (4,000,000 / 5.8764)] = 6,880 HKD.
Using 4,000,000 INR is correct. As per the question, they are hedging only half of 8,000,000 amount.