Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Foward hedge
- This topic has 4 replies, 2 voices, and was last updated 6 years ago by John Moffat.
- AuthorPosts
- December 5, 2017 at 10:10 am #420619
Hello! I have been struggling with the following task:
When I am given the current spot rate, exchange rate in 4 months and exchange rate in 12 months, how the exchange rate for 8 months can be calculated? I am expecting to pay an amount in 8 months period.
Thank you!December 5, 2017 at 11:32 am #420633What you are asking would be unusual for Paper F9 (it is more common in P4). I am wondering if you have interpreted the question correctly.
However you would apportion linearly between the 4 month and 12 month rates.
8 months is half way between 4 and 12 months and therefore you would take a rate half way between the 8 month and 12 month rates (i.e. add them together and divide by two).December 5, 2017 at 11:41 am #420637Thank you. I saw this question in the mock exam.
A company expects to pay $200,000 in 8 months period.
Current exchange rate – 1.75 $/EUR
4 month rate – 1.78 $/EUR
12 month rate – 1.80 $/EURCalculate receipts in EUR if forward hedge is taken?
December 5, 2017 at 11:43 am #420638I calculated the way you gave and got the answer. Thank you!
December 5, 2017 at 1:33 pm #420657You are welcome 🙂
- AuthorPosts
- The topic ‘Foward hedge’ is closed to new replies.