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I don’t know which version of this question you are looking at, but since the original exam question is no longer on the ACCA website, I only have the version in the BPP Revision Kit – and in their version there is no part (c).
Hello sir,
part b)
mshs 116- mshs 128 is the exchange rate.
we used 128 mshs for calculating forward rate, and mshs 116 for expected spot rate using ppp.
Is there a reason why?
sorry if this was a silly question 😐In part (b) they are needing to pay MShs and therefore need to buy MShs. 116 is the rate for buying MShs currently and so this is used to calculate the rate at which they will buy on the future date.
Part (c) is looking at receipts of MShs each year, and the current rate for selling MShs is 128 and so this is used to calculate the relevant forward rates.
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