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Dear sir,
In the BPP Revision kit it says that the qn deals with reverse money market hedge. What does that mean?Also, when calculating interest rates, why are we using interest rate parity in this qn? I don’t understand.
Last but not the least, sir, where does the spot rate of 1.6244 come from? I can’t seem to find the working for it.
Thanks
Again, you must watch my free lectures because this is all explained in the lectures.
The question says that the closing mid-point is 1.6242 and that the bid/offer spread is 239-244.
This means that the actual spot rates are 1.6239 to 1.6244.
(However I would not worry about this. This is the only time rates have been given in this way in the exam. It was the previous examiner, and the complaints about the way he have the rates are one of the reasons he was removed as examiner!)
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