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Forward rate

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Forward rate

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • June 2, 2021 at 6:36 pm #622823
    AshleyMarc1997
    • Topics: 48
    • Replies: 24
    • ☆☆

    Is it true that we can calculate Forward rate by:

    Forward rate = Receipt or Payment / Money Market Hedge

    It is because the Money Market Hedge is totally equivalent to the Forward rate?

    June 3, 2021 at 6:51 am #622870
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49583
    • ☆☆☆☆☆

    Using forward rates is equivalent to using a money market hedge.

    However it is certainly not calculated using the expression you have typed (a money market hedge does not result in a number).

    Forward rates are calculated using the interest rate parity formula provided in the exam, as I explain in my free lectures on this.

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