Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › CMC Co 6/14
- This topic has 5 replies, 2 voices, and was last updated 7 years ago by John Moffat.
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- May 31, 2016 at 2:53 am #318238AnonymousInactive
- Topics: 43
- Replies: 65
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Hi John,
For the answer of this question we determine the lock in rate because the examiner did not provide us with the information about what will happen to spot.
So since we determine the lock in rate we don’t go any further in terms of using the lock in rate as the spot rate to determine the future, which then we can determine the gain or loss on the future etc etc(basically how we normally determine the outcome at the transaction date)……once we have the opportunity to use the lock in rate we can just simply take our amount of currency and change it at the lock in rate? and this can only be done when the question does not provide us with a spot rate? or any information about what the spot rate will be?
BPP Completely changed the answer to this question and used the future rate from today as the spot rate on the future transaction date(im not sure if this was to show the steps regularly but it was completely different from yours/examiners answer)
May 31, 2016 at 7:44 am #318291What you say is correct, in that having calculated the lock-in rate you simply apply this to the amount involved (it effectively calculates the net result of using futures).
I don’t know why BPP bothered doing what they have done (although they do add a line showing the calculation of the lock-in rate).
May 31, 2016 at 2:53 pm #318428AnonymousInactive- Topics: 43
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Thank you very much John,
So when do you see it appropriate to use it and go straight to final answer(thereby skipping the gain/loss part on the futures)? only when spot information on the transaction day is not given?
May 31, 2016 at 3:18 pm #318443That is correct – only when you know what the spot rate is on the date of the transaction.
June 1, 2016 at 3:25 am #318533AnonymousInactive- Topics: 43
- Replies: 65
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Sorry John your reply is kinda confusing, do you mean only when you know what the spot rate is on the date of the transaction then we don’t use the lock in rate?
Thanks again.
June 1, 2016 at 9:17 am #318580Sorry – yes, that is what I meant 🙂
If you know the spot rate then best is to use it.
If you don’t know it then you should calculate the lock-in rate. - AuthorPosts
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