Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › June 2014 CMC Co — Estimate Future rate
- This topic has 3 replies, 2 voices, and was last updated 6 years ago by John Moffat.
- AuthorPosts
- September 4, 2017 at 10:18 am #405293
Could you help me understand how it arrived at predicted future rate based on the current spot rate?
1.0635+[(1.0659-1.0635)*4/6]=1.0651
If the spot rate on the hedge date is not given, how to estimate the future rate according to unexpired basis?September 4, 2017 at 12:15 pm #405318The rate that the examiner has calculated is not in fact a prediction of what the futures price will be, it is the lock-in rate (the net effect of converting the transaction at whatever spot turns out to be, and the profit or loss on the futures deal). If we are not told what the spot rate is at the date of the transaction then we have to calculate the lock-in rate and use that – this is the most common situation these days in the exam.
It will help you to watch my free lectures on the calculation of the lock-in rate.
Also, if you go to the link for ‘revision kit live’ from the main P4 page on this website you will find lectures working through the whole of the question CMC.
September 7, 2017 at 5:20 am #406265thx, that’s really helpful!
September 7, 2017 at 7:37 am #406301You are welcome 🙂
- AuthorPosts
- The topic ‘June 2014 CMC Co — Estimate Future rate’ is closed to new replies.