[laengjei]

Is it that if the question changed to Awan CO needs to hedge against a rise in the interest rate, then it will need to go short in the futures market?

How it will change the calculation? For example, if interest rates increase by 0.9% to 4.99%, the calculation will be like below:

Gain on the futures market = (0.9476 – 0.9455) x 2,0000,000 x 3/12 x 32 = 33,600?

[laengjei]

Sir,

I am sorry about that.

The last one is referring to question 5 (a), in the model answer there are 3 tables, so I indexed them as 1st, 2nd and 3rd table for your ease of reference.

[laengjei]

Question 5 (a) (i)

The model answer given,

1. Step (4)

Spot price – futures price = 94.00 – 93.88

Is the spot price = the middle row in the options table of the question (exercise price of 94000)?

Actually, what is the purpose of this step (4) computing 12 basis points or ticks? What does it mean by “… maturity is four ticks given the contracts will have one month to run”?

2. Step (5)

Why the close out will need to deduct 0.04? How can I get the 0.04?

3. Step (6)

How to get the cost of loan in spot market of 750,000 and 550,000?

The annual equivalent of 6.58%, if I use it to recover the total loan amount by 658,000/0.0658, I get 10,000,000, but I do not see it from the question?

[laengjei]

Question (a)

There are quite a number of figures I could not get, rather confusing to me, spent hours and still could not figure them out, I think I need to seek for your clarification on how to get these numbers:

1. 1st table – the written down value of 31
2. 1st table – the profit on sale of equipment of 8.90, is it 40 – 31?
3. 2nd table – the capital allowance saving – 120, 48, 28.8, 17.28…..
4. 2nd table – the sale of capital equipment of 2.67, is it 8.9 (profit on sale of equipment) x 0.30 (taxation)?
5. 3rd table – new capital introduced of -816.32
6. 3rd table – tax saving on annual interest 17.63
7. 3rd table – discounted value of tax shield on interest – 71.63, 15.87, 15.06, 14.29…..
8. 3rd table – cost of financing, is it 800 x 1.02 (2% transaction cost)?

I feel embarrassing asking them, but I think all the figures are somehow link and I do not know how.

[laengjei]

Question 3 (a)

The model answer, under the interest rate parity calculation:

1. How to get the figure 1.6244 in the formula application? Is it the bid/offer spread?

2. The last sentence stating SFr 1.5 million, is it not Euros 1.5 million from the question?

3. The first paragraph stating at any borrowing rate less than SFr LIBOR + 7, how can I draw this conclusion?

[laengjei]

I see.

I just worried that I applied the wrong method.

I will take note on your advice!

Thanks!

[laengjei]

Question 2(b)

In the model answer, paragraph 2, it states the estimation error is 1.9% and 5.3%, may I know which formula to apply for these?

[laengjei]

^^ okay. Yes, I find those before year 2012 are way more difficult but I thought they may be useful to deepen my understanding. So I will ignore this question.

If you allow, I wish to ask about the question 4 in the same paper, from the model answer:

1. In “Current WACC”, how to get the risk free rate for the current yield on debt, new year on debt and spread?

2. In “Combined rate”, how to get the Rd for 3 year debt and new debt?

[laengjei]

Yes sir, I will rewatch.

[laengjei]

Thank you sir!

If you allow, I wish to ask about the call and put options here.

Let’s say quoted $/£:

Is it that when you have a $ receipt due – you buy call option; and
when you have a $ payment due – you buy put option?

If quoted reversely £/$, then you will do the reverse, you buy put option for the $ receipt due and buy call option for the payment due.

[laengjei]

Yes, I have watched your lectures. This topic is particularly confusing to me.

Let’s say quoted $/£, $1.35 – $1.37:

Is it that when you have a $ receipt due – you are selling the $, so will use $1.37; and
when you have a $ payment due – you are buying the $, so will use $1.35?

Applicable to both spot and forward rates.

[laengjei]

Dear SIr,

Yup! Thank you very much!

[laengjei]

Dear Sir,

I tried to relook but still could not get it….. I am sorry, but I am a rather weak on this paper =(

Do you mind telling me the specific figures?

[laengjei]

I got it already1

Thank you anyway to looking into my question!

[laengjei]

Thank you sir =]

[laengjei]

Sorry sir, I think I was editing my question while you replying. It caused some problem in the reply threads…….

I have another thing to ask for the same question.

b (iii): how to compute the “weighted years” in the table?

Many thanks!

[laengjei]

Thank you sir =] I noted pricing of currency options will no longer be examined.

Anyway, with regard to the same question, could you explain how the figures on “cost of hedge” and ” as percentage of value” arrived? (I am sorry, I have spent long time but still could not figure it out…)

Please do not mind I ask another question in here:

With regard to same past paper – question 3, the answer provided by ACCA:

b (i) “This suggest that this project has a 97.3 per cent probability…….” , may I know how is it computed?\

Many thanks!

[laengjei]

I see.

One of the lecturer told me there was once a change of P4 examiner, and all his questions in the past year papers hence are not recommended for reference.

I am not sure if his advice is agreeable (I could not recall which particular period/papers he referred to).

May I know your view on this?

P/S: I normally will go through the past years paper, just that I am not sure if I should not do it this time.

[laengjei]

Thank you very much for the explanation =]

Anyway, may I check with you which of the past year paper is superseded or no longer relevant to the examination from now on?

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