- This topic has 9 replies, 4 voices, and was last updated 3 years ago by
John Moffat.
- AuthorPosts
- February 14, 2021 at 4:26 pm #610402
Hi John, hope you’re doing good.
I am planning to attempt AFM exam in June 2021 sitting as the last optional paper.
However I have some queries and concerns regarding AFM.
Firstly I have BPP revision kit that is valid only from June 2019 – march 2020. Can I use the same rev kit for June 2021 session since its two years old.
Secondly I had relied on your lectures for FM paper too and scored really well, so I will do the same this time too, but wanted a confirmation from you as to whether the current lectures are valid/updated for June 2021 session since I am planning to start studying from the coming week.
Third I have found Foreign exchange and interest risk management chapters really difficult while preparing for FM, so can you suggest a good approach to tackle these two topics as I feel I am really poor at it.
Lastly revision kit and your lectures plus articles on ACCA website, would these three be sufficient to pass the exam.
Thank you for these resources Sir. πFebruary 15, 2021 at 4:11 am #610429how much did you get in FM?
February 15, 2021 at 6:18 am #61043675.
February 15, 2021 at 8:02 am #610459The lectures are valid for the June 2021 exams (it is only for exams after June 2021 that the syllabus will be reviewed by the ACCA).
There is much more knowledge needed for foreign exchange risk management and for interest rate risk management than in Paper FM, but the AFM lectures do go through it in detail.
It is much more important for AFM than for FM to read all the technical articles, but a combination of our notes and lectures, the technical articles, attempting all the questions in your Revision Kit, and asking in this forum when you have problems should be enough π
February 15, 2021 at 3:24 pm #610516Hello sir, I have a doubt on the Casasophia question. For the futures hedge the s1 and F1 both havenβt been provided. The solution provided in BPP for the futures, they have used the 5 months future rate on todayβs date as their spot (S1) after 4 months. This looks a little confusing.
My assumption was to use the 4 months forward rate (provided by bank) as the futures price. Would that be incorrect?February 15, 2021 at 4:25 pm #610545In future you must start a new thread if you are asking about something different (and if you use our search box there are already answers to many question about the question Casasophia).
You cannot assume that the forward rate will be the same as either the futures price on the date of the transaction or that it will be the same as the spot rate on the date of the transaction – it would be a miracle if either were the case!
When we are not given the spot rate or the futures price on the date of the transaction (which is the most common situation because neither would be known in advance in real life) then we use the lock-in rate. As I explain in my free lectures, the lock-in rate gives the net effect of converting the transaction a spot together with any gain or loss on the futures.
February 17, 2021 at 3:36 pm #610763Hello Sir, Apologies, next time I will start a new thread.
thank you so much for the above response. The lock in rate would be the calculation using 2 month future and 5 month futures price right?
Yes sir, I have studied from the lectures only, they’re a blessing, thank you again.
February 17, 2021 at 4:48 pm #610774You can calculate the lock-in rate in two ways.
The examiner tends to do it by apportioning between (in this case) the price of the futures expiring in 2 months time and the price of the futures expiring in 5 months time.
Strictly it should be calculated in the way I explain in my lectures, which is the current spot rate less the unexpired basis (and he shows this in his answer also).
Both ways give the same result and either is acceptable in the exam.
(As a small point, if there is any written part to a question do not refer to the futures as being 2 or 5 month futures. They are all 3 month futures, it is just that they mature/finish in either 2 or 5 months.)
February 18, 2021 at 3:04 pm #610871okay sir, thank you so much again.
February 18, 2021 at 3:27 pm #610877You are welcome π
- AuthorPosts
- The topic ‘AFM’ is closed to new replies.