Comments

  1. avatar says

    Dear Mr Moffat,

    And I do not understand this multiple choice questiostion too:

    The current spot rate for the US dollar the UK Pound is $/Pound 1.3821 – 1.3925, and the one month forward rate is $/Pound 1.3832 – 1.4001.

    A UK importer expects to have to pay $800 000 in 3 months time. If he uses the forward market, how much does he expect po pay in UK Pounds?

    How can I calculate three month forward rate from one month forward rate?
    Please explain this question with worklings.

    Thank you in advance
    Best regards

  2. avatar says

    Dear Mr Moffat,

    I do not understand this multiple choice question:

    The share price of CP plc is $4 per share.
    They announce a 1 for 5 rights issue at $3.10 per share.

    What % of the rights offered to a shareholder does the shareholder need to take up so as to have no net cash flow resulting from the issue?

    The answer was 19.48%.
    I can not gess how to arrive to this answer.
    Please explain this question with worklings.

    Thank you in advance
    Best regards

    • Profile photo of John Moffat says

      I assume you are referring to the part (iii) that I added to the example in the notes.

      Ilze currently has 2,000 shares. There is a 1 for 4 rights issue, and therefore she will be entitled to buy 1/4 x 2000 = 500 new shares.

      (I assume that you have watched the main lectures (and not just the revision lectures), If you haven’t then I think you will find them useful.)

    • Profile photo of John Moffat says

      We either take up the rights (and pay $3) or we sell the rights (and receive $1.20 for them).

      We do not do both!If we sell the rights, we will be able to sell them for the difference between the ex-rights price of 4.20 and the price that the person buying the rights from us would have to pay to take them up ($3). So we will be able to sell them for $1.20.

  3. avatar says

    Hi John,

    I need some help in terms of understanding of process of when a company raise fund, investments, i.e. right issue in order to complete an expansion . I am referring to Q1 for Dec 08 here. I find it difficult allocate all the information in the right place in my mind when reading a question like this. Any tips? At work right now hence have not watched this video yet. Many thanks, Jing

    • Profile photo of John Moffat says

      It is difficult for me to help when I am not quite sure what your problem is.
      Best is to watch the lecture, and then to ask if it is not clear.
      (But please ask in the Ask the ACCA Tutor Forum for F9)

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