[ferrischan]

Thank John! It is comforting to hear that! Haha was confused and demoralised thinking what did i miss out or did not understand. Thanks!

[ferrischan]

Hi John

Sorry, I had meant that I had choosen the March Future with the future price of 9400. I am puzzled why In the ACCA answer, they buy the future at 92.96. [this is the part i) price where the future close price, but not for ii)]

Thanks

[ferrischan]

Thanks John for the quick reply. Really appreciate it.

I got 1.3639 from the below:

Spot is 1.3618 (right side “sell USD” as i am a Eur company and receiving payment)
My 5 mths future is price is 1.3698 thus my basis is 1.3698 – 1.3618=0.0080.

As we are receiving payment in 4 mths, we close out the future contract in 4 mths too. As the future contract is a 5mths future contract, I took 0.0080*1/5=0.0016. Having the forward rate of 1.3623 as the future spot rate, I used it to add 0.0016 to get 1.3639.

Please advise where did I go wrong in not getting 1.3676. Thanks 🙂

[ferrischan]

Same here. Hope to clear by God’s Grace

[ferrischan]

Thieuson. That was a nice one. I failed to use PPP to get the forward rate. For the option, how do we know the contract size and the basis risk to calculate the option? Thanks

[ferrischan]

How do we solve qns 2? Isn’t it on fx? How then do we solve using interest rates? The 1st one we can use money market hedge by borrowing, converting and deposit. But how do we use the info on interest rates for forwards, future and option? Anyone can advise?

[ferrischan]

Sorry. I thought it was Gmt +8.

[ferrischan]

Hi, we do not take in the interest element as it is the whole 600k that is the capital employed (regardless how is the structure of the capital) * WACC. Hope that is clear.

As to the MIRR, how come they do not take in the cost of capital? and when they do the PV of Investment and Returns, how come they are using 4.5%?

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