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richardscully.
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- May 28, 2018 at 9:40 am #454369
I do not understand the ticker
Do i add the 239 and the 244 to any rate depending on whether i am buying or selling?
one month rate….”annual” ?????
Three month rate……”annual”?????
Thanks
May 28, 2018 at 12:31 pm #454387Am I correct…q2 in this paper?
In order to see which is the better option, a money market hedge or using a forward rate then we must do the interest rate parity and reverse equation to calculate the best borrowing cost overseas….and we must do this whenever the question is asked anywhere even if they do not specify to calculate the maximum borrowing rate overseas in order to decide???
May 28, 2018 at 4:28 pm #454427This question was set by the previous examiner, and is the only time rates have been quoted this way in the exam (and the ACCA had a lot of complaints about it).
Depending on whether you are buying or selling you replace the last three digits of the mid-point rate by the bid/offer quotes.
So the rate becomes 1.6239 – 1.6244.The one and three month rates (1.6223 and 1.6176) and the forward rates.
The %’s are the interest rates and interest rates are also quoted as annual rates – the rate quoted will be different depending on the length of the deposit/borrowing.
This is really the only bit of the question that is important for the current exam, and I explain this in my lectures on money market hedging.With regard to the calculation of the lowest acceptable rate for a money market hedge, this was a very strange thing to have asked (again, this examiner was removed). However, as again I explain in my lectures, forward rates are determined always using IRP and so it does require working backwards.
May 29, 2018 at 7:49 am #454560Thank you very much
I am going to speculate that we probably will not get this format and just read through it (but we could)
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