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Sir in calculating basis for 2 month futures to pay €393265 it’s given as follows in the book
End of April June future is o.6964
Spot (1/1.433) =0.6978
Basis ( 0.0014)
But shouldn’t we be using 1/1.439 for spot instead of 2 month forward rate used here
Also they have used end of April spot as end of June spot in calculating end of June futures . This is soo confusingGiven that the transaction in 2 months time involves buying euros, the answer has used the spot rate for buying euros in order to calculate the basis.
The BPP answer is very strange (I think they copied it from the examiners answer, but it was the previous examiner who was removed).
The correct answer is to calculate the lock-in rate which is what is shown in the ‘alternative solution’ in the BPP Revision Kit.
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