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2016 June exam

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › 2016 June exam

  • This topic has 31 replies, 7 voices, and was last updated 7 years ago by sajini.
Viewing 7 posts - 26 through 32 (of 32 total)
← 1 2
  • Author
    Posts
  • November 28, 2016 at 3:55 pm #352196
    Ibrahim
    Member
    • Topics: 41
    • Replies: 79
    • ☆☆

    OK.thanks

    November 28, 2016 at 6:47 pm #352223
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    You are welcome 🙂

    November 29, 2016 at 1:42 am #352270
    melanie0412
    Member
    • Topics: 1
    • Replies: 2
    • ☆

    I would like to ask why is it a call option instead of put option for Q1. The currency option quoted is: contract size $125,000, exercise price € per $, premium price € per dollar. If the option is quoted in $, hence it is the right but not the obligation to buy or sell $. If we anticipate € depreciating since question states a permanent shift (meaning $ will appreciates). We will receive less $ after converting the € reciept. Is my understanding correct as of this point? I cant seems to grasp the logic of call/put options. If you could please explain the logic to derive a call option?

    November 29, 2016 at 6:22 am #352305
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    Since we are receiving €’s, we will be selling €’s and buying $’s.

    Therefore we need the option to buy $’s at a fixed price, which is a call option.

    (If we were paying €’s then we would be selling $’s to buy €’s and would therefore need to right to sell $’s at a fixed price – i.e. a put option)

    My free lectures do explain all of the logic involved.

    November 29, 2016 at 9:19 am #352328
    melanie0412
    Member
    • Topics: 1
    • Replies: 2
    • ☆

    Notwithstanding € depreciating/appreciating, we will need to sell € and buy $ since we are receiving €? Is that correct? Since if € appreciates, we do not need to exercise the option. If we reverse the scenario, we need to make a payment in €, we will buy € and sell $. As such, it will be a put option – the right but not the obligation to sell $? I went throught the free lectures but i cant seems to catch the principle behind currency options.

    November 29, 2016 at 5:10 pm #352412
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    I am sorry, but I really can’t simply repeat the lectures again here.

    The whole purpose of using an option is to create a limit to the worst that can happen.

    May 18, 2018 at 4:08 pm #452729
    sajini
    Participant
    • Topics: 0
    • Replies: 13
    • ☆

    thank you

  • Author
    Posts
Viewing 7 posts - 26 through 32 (of 32 total)
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  • The topic ‘2016 June exam’ is closed to new replies.

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