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Good afternoon! Would you say that when the exam asks us to recommend a hedging strategy and let’s say there is an option of FRA, futures and options, if we use the lock-in rate for the first two, is that detailed enough? Or do we need to show all the workings (proceeds from the underlying and gain/loss on the hedge to offset it)? Thank you, sir!
Good afternoon! I apologise if this has been answered elsewhere… I know we are not given the required return on debt for Hav, but in calculating the premium derived from the convertible bond (option) 3, should we not in theory be concerned with the MV of such bond? Similarly, should we not be trying to estimate the future value of shares at the end of year 6 to get the true value of the bond now… or am I getting confused about the whole approach to valuing bonds (have been doing too many past exams in the last few days) 🙂 Thank you