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Result of hedge using lock in rates

This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.

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June 5, 2023 at 10:07 pm #686114
simranxdeep
Participant
- Topics: 39
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In Nutourne, the examiner solves the sum by
(Lock in rate * Number of Contracts * Contract Size) + Amount converted on Fwd contract
I did it by Lock In Rate * Contract Amount (amt to be recieved)
Is my way correct? Or should I follow the examiner’s way of solving?
June 6, 2023 at 6:51 am #686143
John Moffat
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- Topics: 57
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The examiners answer does use the lock-in rate in his second alternative workings (he calls it the predicted futures rate which is strictly speaking the wrong wording).
The forward contract only applies to the amount not hedged by the futures contract.
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