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Dec 2013 q3

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Dec 2013 q3

  • This topic has 6 replies, 3 voices, and was last updated 8 years ago by John Moffat.
Viewing 7 posts - 1 through 7 (of 7 total)
  • Author
    Posts
  • November 23, 2016 at 12:03 pm #350936
    Muslim Farooque
    Member
    • Topics: 190
    • Replies: 134
    • ☆☆☆

    Sir in part (a) for kenduri co. for money market calculation there is a 2.4million net payment by kenduri co ( who is based in uk) to Lakama(based in US) , my issue is that the examiner has used the Dollar Investing rate to find PV of dollars to be converted, i dont get this , I had watched your lectures and to find present value of dollars to borrow , we had always taken the Borrow rate Of US PRIME

    November 23, 2016 at 12:18 pm #350939
    eadinnu
    Participant
    • Topics: 3
    • Replies: 29
    • ☆

    Good day Farooque,

    You need to make a distinction between when a company is buying the foreign currency (paying a creditor abroad in forex) and when he is selling a foreign currency (receiving forex from a debtor abroad.

    The choice of the bid or offer rate depends on whether the company is buying or selling the base currency. In this quote $/£, pounds is the base currency.

    John Moffat has done excellent lectures on how to know what rate to use in the beginning lecture videos of F9 and P4. Do well to go back to them now.

    You cannot achieve much with forwards, futures, options and swaps if you do not master this basic issue.

    Regards,

    November 23, 2016 at 2:35 pm #350994
    Muslim Farooque
    Member
    • Topics: 190
    • Replies: 134
    • ☆☆☆

    Eadinnu , thats fine but i would like the tutor sir John to answer,

    November 23, 2016 at 2:46 pm #350998
    Muslim Farooque
    Member
    • Topics: 190
    • Replies: 134
    • ☆☆☆

    I have infact made a mistake in understanding the question actually, its a payment hence an investment is required of $’s , sorry my bad

    November 23, 2016 at 3:50 pm #351011
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    eadinnu: Than you for your answer (and your nice comments 🙂 ) but please do not answer in this forum because it is Ask the Tutor (but please do help students in the other P4 forum 🙂 )

    Muslim Farooque: No problem

    November 23, 2016 at 6:36 pm #351045
    eadinnu
    Participant
    • Topics: 3
    • Replies: 29
    • ☆

    Thank you Prof. The point is noted.

    Muslim Farooque: My profound apology.

    November 24, 2016 at 4:23 am #351113
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    You are welcome 🙂

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