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Dear John,
Refer to the question Keshi, please tell me why option 96.00 was not considered/calculated at all in the provided answer? Effective interest rate is 5.082% (in case of increase by 0.5%) and 4.602% (in case of decrease by 0.5%) – these are my answers.
Also, I got used to solve such questions (futures options, swaps) by using percentage, i.e. firstly to calculate an efective interest rate (EIR) and then net cost by using EIR. It is easy for me and more quickly. Could you please clarify, whether there maybe any questions (related to futures options, swap) which firstly need to calculate net cost and then EIR? I mean, examiner will provide data in such way that EIR can not be calculated first.
Regards
I don’t know why the BPP answer does not consider both options.
The original examiners answer to this question does consider both options.
I can’t imagine a question where you wouldn’t be able to do as you want to do (and as always the majority of the marks are just for proving that you understand how options work 🙂 )
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