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- This topic has 6 replies, 2 voices, and was last updated 4 years ago by John Moffat.
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- March 7, 2020 at 10:04 am #564770
For eg:
Today is 1 march.
Payment will come in 6 months.
Forward rates.
30 march=1.3610
30 june= 1.3550
30 sept= 1.35001. Future estimated rate: 1.3610-((1.3610-1.3500/6)×1)=1.3592
Or
2. Future estimated rate: 1.3550- ((1.3550-1.3500)/3)×1)= 1.3533
Sir I wanna ask you that which one of the above following calculation of future estimated rate is correct. 1 or 2?
March 7, 2020 at 10:36 am #564776Sorry sir let me correct , the above rates that are 1.3610, 1.3550 & 1.3500 are future rates.
March 8, 2020 at 6:27 am #564854Neither are correct!!
The lock-in rate in 5 months is either:
1.3610 – ((1.3610 – 1.3500) x 5/6) = 1.3518
or
1.3550 – ((1.3550 – 1.3500) x 2/3) = 1.3517
The difference is due to rounding and is irrelevant.
March 8, 2020 at 6:49 am #564866Sir in exam I have calculated future estimated rate in a wrong way so is it a major or a minor mistake?
March 8, 2020 at 12:51 pm #564892It depends what you did wrong and how many marks were allocated to that section.
March 8, 2020 at 5:34 pm #564909Ok sir well the question carried 11 marks and asked about the hedging techniques so I wrote about three techniques forward,currency future and option. Future estimated rate was part of currency futures. So it is a minor I guess?
March 8, 2020 at 6:49 pm #564921It seems as though it is minor 🙂
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