[estherpang87]

Hi,

Never ask people about how to pass P4, because no one can help you. This kind of question is idiotic. I’m sorry to be mean.

[estherpang87]

P4 was my 3rd attempt. ACCA has finally granted me a pass with 50 marks. Thanks to opentuition. Im now an affliate. 🙂

[estherpang87]

Hi sir, thank you for your reply.

so that is to said, opening basis, on 31/12/2011 is still exist if the interest rate and future price is not same. but there would be no remaining basis because the futures closed-out date is also the maturity date. Therefore, the effective lock-in rate will just be the opening futures price.

In addition to this, As I know, on maturity date, both the implied LIBOR rate and futures price will be the same in value. so, on closed-out date, which is also maturity date, lets say the future LIBOR rate is 8%, implies a futures price of 92.00. the closing futures price will also be 92.00 irrespective of the opening basis. But still, because of the existence of opening basis, the gain or loss on futures will not be exactly matched the loss/gain on the underlying transaction in the cash market. am i right, sir?

Thanks in advance.

[estherpang87]

hi there, thanks for your reply. i get that now. thank you.

[estherpang87]

Hi,

did the question say value of scrap is at current price? if no, then u don’t have to inflate it. usually scrap value is not subject to inflation.

[estherpang87]

Hi sir,

In June 2011 Question 2, I notice that the way in which examiner calculate the future spot rate in 6 months’ time using both PPPT (part b) and IRPT (part c) is that he first calculated
Step1: the future spot rate in 1 year’s time
Step 2: (the difference between the future spot rate in year’s time derived from
step 1 and the current spot rate) x 1/2
Step 3: figure derived from step 2 add to or subtract from the current spot rate
= future spot rate in 6 months’ time

My method would be slightly different in the sense that I will not follow the above steps but rather calculate as follows:
For PPPT, current spot rate x [(1+hc)/(1+hb)]^½
For IRPT , current spot rate x [(1+icx½)/(1+ibx½)]

Sir, are both of my methods equally correct and acceptable, albeit the final figure derived would be slightly different from that of the examiner?

I seek for your clarification. Your reply is much appreciated. Thank you sir.

Best regards,
Esther Pang

[estherpang87]

Hi sir, please tell me whether my perception regarding the above issue is right or not?

and one more question here, If any bond or debt which is issued at discount to its par value, such as treasury bill and commercial paper, does it mean that there will be no coupon bearing element for which interest is to be paid? In other words, the issuer of the bond doesn’t have to make regular interest payment BUT only liable to pay the definite capital sum at the end of the maturity of the bond.

Your reply is highly appreciated. Thank you, Sir.

Best regards,
Esther Pang

[estherpang87]

Hi there, i’m not tutor. but i saw tutor’s reply on the same topic posted by a student a year ago. Here is the tutor’s answers.

The way it is calculated is as follows:

Property prices are rising at 8% pa in real terms. There is general inflation of 2.5% p.a. and so the actual price increase will be (1.08 x 1.025) – 1 = 10.7%

There is 5 years inflation, and so the value of the property will be:
6.2M x (1.107)^5 = 10306941

There is to be a charge for repairs and renewals of 1.2M at current prices.
So this will inflate at the general rate of inflation of 2.5%, and because it is at current prices there will be 6 years inflation.

This gives an actual cash flow of 1.2M x (1.025)^6 = 1391632

So….the net actual (nominal) cash flow is 10306941 – 1391632 = 8915309.

Hope that helps! (It was bad of the examiner not to show the workings. BPP’s answer is different for just that bit, but there’s is wrong!)

Good luck

[estherpang87]

hi there, thanks for your reply. U solved my problem. the suggested answer was between 17 and 18%, and your answer is exactly within this range. thank you so much.

[estherpang87]

Hi sir,

A million thanks to you. You have finally solved my problem. Thank you so much.

[estherpang87]

hello sir, for the two market values tat you mentioned, are you referring to both equity and debt of each company?

Eg: Acquirer’s mv of equity is 100 and mv of debt is 50, Total MV = 150
Acquiree’s mv of equity is 80 and mv of debt is 30, Total MV = 110

So when calculate combined asset beta using weighting, We should use the Total MV of 150 and 110 which included the MV of the debt right?

Thanks

[estherpang87]

Sir, plz guide me regarding the above issue. million thanks to you.

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