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Hello sir,
in this question, I am confused by 2 points:– why did they rounded DOWN the contracts instead of just rounding to the nearest whole? (I figured maybe to avoid more premiums?)
Eg: 115.9 rounded to 115 instead of 116.
Is it wrong if I rounded to 116?-to find the forward rates shouldn’t we do : 128 x (1.022/1.108) instead of 128 x (1.108/1.022)?
My logic being: 128 is 128 MShs per euro therefore the number which is on the numerator should be the rate of Mazabia
No?Thanks..
1. it doesn’t matter in the exam whether you round up or down. I would round up in this case. (The final answer may well be slightly different as a result, but that is irrelevant).
2. The calculation in the answer is correct because Mazabia is being quoted against the euro. and the euro rate is 2.2%
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