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Money Market Hedging.

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Money Market Hedging.

  • This topic has 3 replies, 2 voices, and was last updated 6 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • January 16, 2019 at 8:09 am #502193
    pratim
    Member
    • Topics: 16
    • Replies: 12
    • ☆

    Sir, Example 6 In Open Tuition Book. Chapter 23.

    So Since We Are Hedging Receivable We Are Going To Create A Liability Of Amount Such That Principal + Interest Is Equal To Amount Of Receivable.

    Now The Amount Is $5M.

    Interest. = $5M * 1.45% (3 Months) = 72500.

    So The Principal Amount (Loan Taken) Should Be $ 4927500.

    This Doesn’t Match With Solution In Book.

    January 16, 2019 at 3:43 pm #502287
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    It doesn’t match because what you have written is not correct!!

    Interest is charged on the amount borrowed. If they were to borrow your figure of $4927500 then the interest would be 1.45% x 4927500 = 71448.75 and so they would not end up owing a total of $5M.

    As I replied to you yesterday, you must watch the free lectures where I work through the examples.
    There is no point using the notes without watching the lectures because it is in the lectures that I explain and expand on the notes. If you are not watching the lectures for any reason then you must buy a Study Text from one of the ACCA approved publishers and study from there.

    January 16, 2019 at 4:37 pm #502314
    pratim
    Member
    • Topics: 16
    • Replies: 12
    • ☆

    Thanks Sir. I Do Watch Your Lectures. I Might Have Just Skipped This Point. Apologies!

    January 17, 2019 at 8:46 am #502403
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    No problem, and you are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Money Market Hedging.’ is closed to new replies.

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