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dear tutor
I wonder in the real exam whether students can use the way in the answer to calculate effective rate for collar.
comparing other exam papers questions, in stead of calculating elements of no of contract and contract size, what presented in 2020SD Q3 answer, it only considers changes in borrowing rate, loss on exercise price and net premium, it’s more time saving in real exam. but I am not sure whether it will be rewarded the full mark as 2020SD Q3 is special, hedging for 36 months.
thanks
I do not know what you mean about it being a ‘new way’ (and the answer does calculate the number of contracts).
It would get full marks because it is the examiners own answer!
It makes sense to show it the way in the answer because the question asks for the results in % terms and I do show that way in my lectures.
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