Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Foreign exchange risk management_Practice question 14, Little Plc
- This topic has 7 replies, 3 voices, and was last updated 11 years ago by John Moffat.
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- May 5, 2013 at 8:28 am #124563
Hello, thank you for great lections!
I have a question in regards of the question 14 Little Plc, part (b), page 170.
The net cash payment for 6 months is $447 – $154 = $293, that is clear.
According to this calculation the net cash receipt for 3 months should be $197 – $116 = $81.
Why do we take the net payment for 3 months as $197? Why payment, not receipt? Why $116 are not hedged?With best regards!
May 5, 2013 at 11:14 am #124575I am sorry – there is an error in the answer.
It is a net receipt of $81,000 and the answer should read:
The net receipt in three months is ($116,000 – $197,000)/1.7063 = £47.471
Sorry about that 🙁
May 5, 2013 at 9:00 pm #124668Thank you,sir!
May 6, 2013 at 7:54 am #124684Thank you for spotting the mistake 🙂
May 7, 2013 at 5:29 pm #124810John,
I am getting the following answers using money market for the same question as above on the three months forward.
Borrow: 79218 USD
Convert: 46218 pounds
Invest: 47316 pounds
Could it be the same mistake as above? i.e. the mistake on netting off of the receipt and the payment?Thanks
May 8, 2013 at 8:11 am #124852Oh dear 🙁
Yes – it is the same mistake (and typing errors as well!).
I will correct the whole page today.May 8, 2013 at 1:16 pm #124884Great
May 8, 2013 at 6:52 pm #124909Sorry 🙁
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