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Forward rate – currency exchange

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Forward rate – currency exchange

  • This topic has 6 replies, 2 voices, and was last updated 5 years ago by John Moffat.
Viewing 7 posts - 1 through 7 (of 7 total)
  • Author
    Posts
  • February 20, 2020 at 4:43 pm #562522
    nikaido
    Member
    • Topics: 41
    • Replies: 89
    • ☆☆

    Dear, Mr Moffat

    We have to chose the relevant fra from the pair. Instead of logically working out which fra is applicable from the pair

    I have observed whatever fra rate that is shot against the foreign currency results in more value. Is the applicable one from multiple questions i solved

    is that so? so i could apply this technique to figure out the applicable fra from the pair.

    February 21, 2020 at 6:37 am #562557
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54682
    • ☆☆☆☆☆

    I am sorry but I have no idea what you mean.

    FRA’s are for interest rate risk management.

    If you are referring to foreign exchange forward rates then there is nothing to choose from – it is whatever the forward rate is that applies to the date of the transaction.

    February 21, 2020 at 10:40 am #562593
    nikaido
    Member
    • Topics: 41
    • Replies: 89
    • ☆☆

    Yes foreign exchange forward rates not interest

    But the pair is given. Even though one is applicable. Sometimes examiner gives the pair instead of the applicable.

    I know there is a reason associated with chosing the relevant rate from the pair, but leaving that aside.

    I have observed whatever fra rate that is shot against the foreign currency results in more value. Is the applicable one from the multiple questions i solved. Is that so?

    I hope, u get where I am trying to get at now. It’s basically to figure out which rate is applicable from the pair, not anything else

    February 21, 2020 at 4:14 pm #562640
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54682
    • ☆☆☆☆☆

    I can only assume that you mean that the buy and sell rate are given just as they are with spot rates, and the rule as to which to use is exactly the same as for the spot rates.

    My free lectures on foreign exchange risk management spend time explaining which rate to use, and why.

    February 21, 2020 at 5:25 pm #562651
    nikaido
    Member
    • Topics: 41
    • Replies: 89
    • ☆☆

    Ok. I’ll give it a look now

    February 21, 2020 at 7:23 pm #562667
    nikaido
    Member
    • Topics: 41
    • Replies: 89
    • ☆☆

    Thank you

    February 22, 2020 at 8:38 am #562703
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54682
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 7 posts - 1 through 7 (of 7 total)
  • The topic ‘Forward rate – currency exchange’ is closed to new replies.

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