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2012 june question number 3

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › 2012 june question number 3

  • 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
  • September 3, 2019 at 5:50 pm #544562
    kennigara
    Participant
    • Topics: 193
    • Replies: 250
    • ☆☆☆

    Hi Dear Tutor, I have some questions

    It says deposit in European state is 3% and borrow rate is 5 %

    It says deposit in home country(THE USA) is 4% and borrow rate is 6%

    ——————————–Deposit————borrow
    euro—————————3%—————-5%
    dollar————————-4%—————-6%

    Since it says the home country is the USA and if it exports meaning that it receives euro 500000

    I did in the following way

    Borrow euro 500000/1.03=(6%*6months/12 months/100%+1)=485437euro

    Comvert to dollar-485437/2euro current spot rate=242719euro

    deposit at euro=242719*1.015=(3%*6months/12 months/100%+1)=246360

    in the answer 5% borrow rate has been taken and deposit rate is 4 %

    Usually if I sell if my home currency is dollar i take the highest borrow rate and take the lowest deposit rate but in this example I confused
    Need explanation for 2012 june paper question?I put 2015 as it is the same as June 2015.

    June 2015 question section B 1
    ————————-Deposit————–Borrow
    euro———————-4%—————-8%
    dollar——————–2%—————3.5%

    home currecny is dollar and the receipt is euro and i took the highest borrow rate and take the lowest deposit rate and the answer is correct.

    Thanks in advance

    September 4, 2019 at 11:40 am #544678
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54805
    • ☆☆☆☆☆

    Zigto is borrowing euros. The euro borrowing rate is 5% p.a. and not 6%.

    They are depositing $’s and the $ deposit rate is 4% p.a. and not 3%.

    This is all explained in the examiners answer!!!

    September 6, 2019 at 9:06 am #545235
    kennigara
    Participant
    • Topics: 193
    • Replies: 250
    • ☆☆☆

    ?f I look at this prespectice EURO libor 3 and 5 and USA libor 4 and 6

    Now it is clear for me.

    Thank you very much my Dear Tutor.

    September 6, 2019 at 3:52 pm #545304
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54805
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘2012 june question number 3’ is closed to new replies.

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