[Kkyn]

Okay, noted. Thank you!

[Kkyn]

Hi John,

For question 1, in the examiner answer, the examiner has used 1.0361 to obtain the expected futures receipt as per below.

Predicted futures rate at the end of May = 1·0345 + ([1·0369 – 1·0345] x 2/3) = 1·0361

Expected futures receipt = CHF12,250,000 x 1·0361 = $12,692,225

However, I had calculated as per your AFM lectures, the lock-in rate I calculated is 1.0358 using basis risk method.

I am confused of why is these 2 rates different? and which method to use in my calculation?

[Author]

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