Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

ACCA December Exams

Post comments & Vote in Instant poll >>

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for March 2025 exams.
Get your discount code >>

Reader Interactions

Comments

  1. Hi john.

    First of all thanks for being here helping students around the world. My question relates to the future deal as discussed above. You have converted the original transaction but have not closed the future deal. Are we not supposed to include the gain/Loss on futures??? Thanks again for helping us

  3. Hello sir,

    Thanks so much for your efforts and time supporting student community.

    Just some comment regarding the second Revision lectures question other users might be useful too.
    I could not find the question “ACCA P4 Question 1 June 2014 ACCA Exam” in the BPP revision kit book (as it was marked on Revision lecture) but I did find it on the ACCA web site as “Specimen Exam applicable from September 2018”.

    Feel free to delete my comment if not relevant.

    Thanks again and best wishes,
    Sandra

  6. Dear John, thank you for your effort to help us past his exam. But past exams from 2013 are no longer available at ACCA pages. Could you possibly share ito us via opentuition websites? Or at least share names of the questions, they probably are part of Practise & Revision Kit. Many thanks. Mon

  7. hi john
    In your lecture on lock-in-rate , you said when we calculate lock.in rate, we will deduct expired basis from current spot and add unexpired basis to future price, so why in CMC june 2014 question we add expired basis.
    plz explain me,
    thnks

    • The lock-in rate gives the net effect of converting at spot together with gain oarless on the futures. So yes – the calculation of the gain or loss on the futures is not relevant when using the lock-in rate.

  9. Hey, John great lecture. In this question, I have assumed that Switzerland’s inflation is 3% and multiplied it with 3 to get US inflation rate. After this, I calculated spot rate using purchasing power parity. Using that rate I found at the futures price in 4 months time by subtracting basis from calculated spot rate. The final futures answer gives me a difference of CHF 2084. So will I get marks for it?

  10. when you calculate the lock-in rate, you used 1.0635+0.0016=1.0651, why shouldn’t I use 1.0635+0.0008=1.0643 or 1.0659-0.0016=1.0643. I’m confused when should I use the difference 0.0016 and 0.008. Can you please explain? Thanks.

    • You either take the current spot rate and adjust by the expired basis:
      1.0635 + (4/6 x 0.0024) = 1.0651
      or, alternatively, you take the current futures price and adjust by the unexpired basis:
      1.0659 – (2/6 x 0.0024) = 1.0651

      (As to whether you add or subtract, it is whichever way makes the lock-in rate in between the current spot and the current futures price.)

    • Yes (the examiner shows both in his answer and either is fine).

      He should not have called this the closing futures price – it is the lock-in rate.

      The sign does matter in that the futures price and the spot rate will always get closer together – this determines whether you add or subtract.

      • the sign has been bothering me …. up to now since closing spots were always given.. i did not have a problem….but now.. if i set up the table as

        Spot —1.0635
        future—1.0659 ———this will give me (0.0024)

        but if i setup the table as

        future — 1.0659
        spot—— 1.0635 ………… this will give a positive sign

        what is on to do??

      • It doesn’t matter – all you have to remember is that spot and future will get closer together.
        If current spot is higher than current future then it will stay higher. If current spot is lower than current future then it will stay lower.

  14. @Mr.Moffat re lockin rate – would it be acceptable to use banks forward rate for the future rate estimation and then calculate payment on the spot market plus loss on future market instead of using a lockin rate? thanks in advance

      • All our resources are free of charge, and everything that we currently have is already available. More lectures going through past exam questions will be added when I have the time.

      • Thank you sir for allocating your time and effort.
        I have a quick clarifation on how the future basis calculated. In the lecture slides this is calculated as (Future price – spot), but you have taken as spot-future price. is there any specific reason for this? Appreciated if you could help me on this.

      • It doesn’t matter which way round – the difference will be the same and it is the difference that matters.
        As the basis (the difference) reduces, if spot is higher than futures it will always be higher; if spot is lower than futures then it will always be lower.

  16. Thank you so much for all your help John and OT team. P4 is my last exam for ACCA. I hope I can pass this in first attempt. I have always used OT exclusively without any college tuition so far.

Leave a Reply