Forum Replies Created
- Posts
The examiner’s answer is more like a bank guarantee on exchange rate rather than put options.
Hi John,
I have problem with the same question part c), the put option has right to sell at exercise price. exercise price is 7.75 while actual exchange rate is 7.6046, so the company can sell option at 7.75 and buy back at 7.6046, so the option should be exercised. When the option price is 7.25, the company should not exercise coz it can sell at actual price of 7.6046. I list the detailed calculation below:
exercise price 7.75. actual transaction: 7500/7.6046=€986
gain on options: 7500x(7.75-7.60)=$1125/7.6046=€148
premium paid: 1.6% x7500x.1430=(€17). Total of €1117Can you please point out my mistakes? Many thanks.
Thansk John,
I did watch your lecture, but I thought we are hedging for the period from 1/9 to 30/11. Once the investement is made, the movement of interest rate is inrelevant as the rate is fixed unless the investment is on floating rate which is not told in the question. becasue from 1/9 to 30/11 is 3 months, wich is the same period as futures contract. I thought we only need to buy 25 contrats instead 50. Do you think we are hedging for period from 30/11 to 31/5?
Hi John, sorry to bother you again. I attempted this whole questions 2 (a+b) again, It took me almost 1.5 hours. especially part B, two interest rate, two strike price, and collar. It’s impossible to complete all within 45 mins. Do I need to write so much as examiner’s answer?
Can you please give me some advise? Thanks.Examiner always give two strike prices in the question and his answer also include both strikes. Do I need to calculate options with both strike prices, or I can choose one only, what’s the rule to choose the strike? If I choose the strike that close to future price, then interest rate 4.1% and 3.1% will have different strike price, is it OK? Thanks.
Thanks John.
I have read the course notes and listened lecture of Chapter 8. The Macaulay duration is payback period. it calculates the Pv of each year’s cash flow x time period then divide by MV. I understand the concept. However, the chapter 8 doesn’t mention project duration which was asked in this exam. It calculates the percentage of total PV x time period. Frankly, I don’t know what the project duration is? Why do we need to measure the duration of recovering half the PV, what’s the logic behind this calcutaion?
Thank you John,
But in page 79 example 4, the cost of debt is 8%, you deducted 30% of tax when WACC is calculated. Did I miss some ideas or confused?
The project was completed on 30/6/2014 when the drug went into immediate production.
ACCA ‘s answer for amortisation is 3 months March to June.
Can you please let me know when the amortisation should start and why?
Thank you very much.
I just realised it applies to revaluation model in the question, so the gain in revaluation should go to surplus rather than p/l, but BPP add it to p/l. The question is:
Speculate owned an office building with a depreciated historical cost of $2m and a remaining useful life of 20 years at 1/4/20×2. On 1/10/20×2 Speculate ceased to occupy the building and let it out to a third party. The property was reclassified as an investment property, applying the revaluation model in accordance with IAS 40. the value of property was independently assessed at $2.3m at 1/10/20×2 and had risen to $2.34m by 31/03/20×3.
What amount will be charged/credited to profit or loss in respect of this property for the year ended 31/3/20×3?
My answer is only 6 months depreciation should go to p/l, 2m/20years x 6/12=50,000, BPP has different answer.
Mike, can you please let me know your calculation? MT.
Hi Biggles,
Which video did you watched, can you please give me the link? John Mofats has many videos on this website. Thank you.