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September 24, 2022 at 3:13 pm
First of all, thank you for the video. I am extremely grateful to everyone at Open Tution.
My question is, shouldn’t the exchange rate be Pounds/USD since the base rate should be the left one and the quoted on the right? That was what I learned in F9.
My working would be $100,000*1.6250
John Moffat says
September 24, 2022 at 3:34 pm
No – it is the way round that I show in the lecture (and was the same in Paper FM 🙂 )
September 25, 2022 at 12:02 pm
Thank you for the reply.
Sorry, to clarify further, shouldn’t the base currency be on the left and quoted on the right? To my understanding, for example, $/Pounds = 0.8
which means to say, 1 USD = 0.8 pounds.
I asked a friend who did f9 as well and she adopted that method too. Not sure why its the other way round.
hope to hear from you and sorry for disturbing
September 25, 2022 at 5:08 pm
As far as both the FM and AFM exams are concerned, if there is an exchange rate given as $/Pound 0.80 then it means that 1 Pound = $0.80. The lectures are correct!!!
(And before you say that you (and your friend) both passed Paper FM but took it the other way, then unless you scored 100% then maybe that was one of the reasons. Also there is never an awful lot of foreign exchange in Paper FM but in AFM there is always a 20 mark question that is either foreign exchange or interest rate management, which makes it much more important.)
The current examiner is very fair in that more commonly he will give the exchange rate as $0.8 per pound. Then there is no possibility of confusion. However he doesn’t need to do that and doesn’t always do that.
January 23, 2022 at 3:17 pm
I have a query related to one of the hedging method i.e Matching.
Confusion is why we always create delibrately expense to match FCY income/expense ?
January 23, 2022 at 3:41 pm
We create the expense so as to match the income (in the same currencies). That way, if the exchange rate changes then either we get. more income but also more expense (when they are converted to out own currency, or the other way round. In both cases the extra income and extra expense (or the lower income and lower expense) cancel each other out, so the net amount (in our currency) stays the same.
May 20, 2021 at 11:20 pm
Hallo John, I used to use Reuters, Bloomberg, and many many other services. Every time the first currency is base and equals to 1, the second one is quoted.
Do you know why on ACCA exam it is other way round? It is so confusing…
May 21, 2021 at 9:14 am
Different countries and different institutions quote exchange rates in different ways as regards which currency is quoted against the other currency. I explain the way in which they are quoted in exam questions.
March 13, 2022 at 5:47 am
ACCA seem to use indirect quotation due to the strength of the pound.
March 13, 2022 at 7:58 am
It is not always the pound (more often it is between the dollar and the euro). Also it is not because of the strength or the weakness of the particularly currency.
May 13, 2021 at 10:36 pm
I am preparing for my June sitting.
Is there any lecture available where you have explained the conversion of foreign currency i.e. when to multiply or divide (in detail)?. As I am still struggling with the basic part.
May 14, 2021 at 8:45 am
It is explained in this lecture!
February 11, 2021 at 1:54 am
Thank you very much sir. The way you explained it is great! I was so confused before watching the lecture.
February 11, 2021 at 7:51 am
Thank you for your comment 🙂
January 29, 2021 at 10:08 am
Hi Mr John,
Thank you so much for this video. It was difficult to get the logic by only self studying. God bless you.
January 29, 2021 at 3:49 pm
I am pleased that you found it useful 🙂
November 16, 2020 at 8:07 am
Really Helpful! Thank you so much! 🙂
November 16, 2020 at 8:24 am
adiru deen says
September 14, 2020 at 11:21 am
Dear Mr. John,
Kindly help me with this if you are given inflation rate of 8% and operating profit for various years as cash flow then you have operating profit after depreciation also. and was told all these profit are on real terms.
Is it right to inflate the operating profit after depreciation by the rate of 8% and then add it back to the various operating profit to get the cash flow and then inflate these cash flow figure by 8%?
September 13, 2020 at 8:13 am
Mr. John Moffat,
Really helpful lectures! Thanks a lot.
I took the remote AFM Exam on Friday. The paper was a relatively straight forward one but I couldn’t finish the paper on time. I guess my practice with the computer wasn’t sufficient and I felt very unfamiliar with the response format. Also, in the last 20 minutes of the exam, the connection to the server was lost and couldn’t be restored for a while (an hour!). So the exam i believe got submitted anyways.
Nevertheless, all the lectures were clearly explained and I thank you again sir.
I will be starting to work on the AFM again with the computer because I am not confident I would get a pass on this one. However, I am glad that the fail is not because of a lack of sufficient knowledge and will work harder for the next one!
September 13, 2020 at 9:25 am
May 16, 2020 at 9:16 pm
Hi John! Thanks for the lessons. They are great.
Could please explain me a easy way to know when I should consider as call option or put option. I understand the a call option gives the right to buy and put option gives the right to sell.
For example in the UK and have:
to pay dollars
to receive dollars
Which option should I used for each situation?
May 17, 2020 at 9:21 am
If you are paying dollars then you need to buy dollars and sell pounds.
Which options you buy depends on which currency the options are quoted it – you need a call option in dollars (because you want to buy dollars) or a put option in pounds (because you want to sell pounds).
In future please ask this sort of question in the Ask the Tutor Forum rather than a comment on a lecture 🙂
April 13, 2020 at 1:42 am
Really good lecture.
April 13, 2020 at 7:37 am
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