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July 31, 2020 at 2:52 am
Hi Sir, For example 7, after all the calculation, if I have this kind of question in the exam, on the answer sheet Can I conclude and write down that ” Q need to deposit 4,980,494 pounds into the bank today to have $8,000,000 to pay in 3 months.” I don’t know what to conclude because the question is “Show how Q can use the money markets to hedge the risk”. Thank you so much!!!
John Moffat says
July 31, 2020 at 9:06 am
The example is a lecture example so that I can show how we use the money markets. In the exam questions on this would be in Sections A or B and so you will not be typing anything – the question will state what numbers are required.
You will find plenty of examples of how it can be asked in the exam in your Revision Kit.
March 5, 2020 at 10:13 am
It’s one day before the exam and still i can wrap my head around this area of the syllabus, so am just gonna go ahead and hope it won come up.
February 11, 2020 at 7:05 pm
Dear John, Thank you for a great lecture, again.
Quick question on Example 7.
– Conversion: why convert at spot is 1.6201 instead of 1.6283. Thus the company has to sell dollars and buy £ to invest them, I thought, in this case, we should use 1.6283.
many thanks Anna
February 12, 2020 at 6:55 am
No – we are buying $’s so that we can put them on deposit and have enough in 3 months so as to be able to pay the $’s that we owe,
February 12, 2020 at 3:41 pm
thank you, a got a little confused.
January 30, 2020 at 6:47 pm
Hello Mr Moffat
Thank you for your lecture in first place 🙂
I do not understand one thing we borrowing dollars and we pay interest but all of the sudden we have to borrow less than we originally needed i thought that it should be in this way $5m x 1.0145 why do we divide it ?
January 30, 2020 at 10:34 pm
We borrow less than we will need on the future date because by the time we need the money it will have earned interest and so there will be more available.
September 1, 2019 at 3:15 pm
Instead of borrowing money, could we convert today using spare cash then deposit the dollars, which would save us paying any interest?
September 1, 2019 at 4:14 pm
But you would then be losing interest you could have been earning on the spare cash 🙂
June 25, 2019 at 7:29 pm
this type of market hedging questions is important in exam ?
May 20, 2019 at 3:41 pm
If we have to receive the $5m in example 6. Why are we borrowing $ in the first place?
May 20, 2019 at 5:54 pm
In order to be able to convert at todays exchange rate instead of taking the risk of waiting and the exchange rate changing.
I do suggest that you watch the lecture again.
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