BPP Mock Exam 3 Question 16 on money market hedging

This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.

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November 26, 2018 at 9:12 pm #486049
shanekenno
Participant
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Hi John,
I have watched your videos on money market hedging and the exchange rates which i believe i am pretty good at answering them and have a good understanding but i have just done a mock exam and unfortunately i have got this question wrong but the answers dont seem to help.
my calculations were:
Borrow 12m dinars @ 1.04% (Six month Interest rate) = 11,538,462
Convert to $ at spot which is above @ 57.52 = 200600
Deposit @ dollars @ 1.005% = $199601
I look forward to your reply.
Regards,
Shane
November 27, 2018 at 8:31 am #486102
John Moffat
Keymaster
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You have made a mistake in the last line of your workings.
They are depositing $200,600 at interest of 0.5%, and therefore the amount will have grown after 6 months to $200,600 x 1.005 = $201,602
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