- This topic has 1 reply, 2 voices, and was last updated 8 years ago by
.
- Posts
A UK company expects to receive 5 million US dollars in six months’ time from a customer. How can it hedge this receipt on the US futures market? The current spot rate is £/$ 1.4310 and the relevant sterling futures contract is trading at £/$ 1.4275.
What is the number of contracts to be used to hedge the risk, if the spot rate in six months’ time is £/$1.4800 and the futures price is $1.4790.
a 52 contracts
b 54 contracts
c 56 contracts
d 58 contractsAnswer – C
I have no idea to convert as contracts from US$ and currency rates. Please help me on it.
Thanks a lot,
This cannot be asked in Paper F9.
You are expected to know what futures are, but you cannot be expected to do calculations on them until Paper P4.
(Even then, there is not enough information in the question because you need to be told the contract size and the contract currency)Are you watching the free lectures? The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.
- The topic ‘Calculation of contracts using unique currency rates’ is closed to new replies.