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54 BPP Asteroid

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › 54 BPP Asteroid

  • This topic has 3 replies, 2 voices, and was last updated 7 years ago by richardscully.
Viewing 4 posts - 1 through 4 (of 4 total)
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    Posts
  • May 28, 2018 at 9:40 am #454369
    richardscully
    Member
    • Topics: 197
    • Replies: 145
    • ☆☆☆

    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 #454387
    richardscully
    Member
    • Topics: 197
    • Replies: 145
    • ☆☆☆

    Am 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 #454427
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54724
    • ☆☆☆☆☆

    This 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 #454560
    richardscully
    Member
    • Topics: 197
    • Replies: 145
    • ☆☆☆

    Thank 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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