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Hello
I started this question and in futures contract the contract size is in Euro but the transaction amount is in us dollars …for the calculation of number of contracts the amount from the anser is euro 14624159 ..how do we get this …how should I convert a transaction amout to the required currency in which contract size is given for any question
Like here I divide 20000000/14624159just to check what rate the kit is using I get 1.3676…where does this come from
Please explain
You always have to convert the transaction to the contract currency before you can calculate the number of contracts.
The examiner has calculated the 1.3676 by apportioning between the 2 month and 5 month futures rate in order to estimate a 4 month rate.
Alternatively (as again the examiner writes in the answer) you could have calculated the lock-in rate of 1.3682 and used that instead.Did you watch all my lectures on foreign exchange risk management (including the lock-in rate) before attempting the question?
I did watched them all .I made notes ..but I think I missed points …at this stage watching videos consumes lot time ..that’s y asked here ..
Thank u sir for your time and all efforts .
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