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Interest rate RM

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Interest rate RM

  • This topic has 3 replies, 2 voices, and was last updated 7 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • February 18, 2018 at 7:29 am #437826
    boma77
    Member
    • Topics: 70
    • Replies: 97
    • ☆☆

    Dear Tutor,

    in the latest article on how to answer interest rate RM question the autor states in the Discussion part that: “If Wardegul Co feels there is a possibility that interest rates will be higher than 5.41%, the point at which the 94.25 option would not be exercised, it may choose this option rather than the future.”
    Could you please help how 5.41% is calculated.

    Thank you.

    February 18, 2018 at 9:34 am #437837
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    It is 100 – 94.25 – 0.34 (the unexpired basis) = 5.41%

    If the interest rate were to be more than 5.41% then the futures price would be less than 94.25 and they would not exercise.

    It may help you to watch my free lectures on interest rate risk management.

    February 18, 2018 at 9:38 am #437839
    boma77
    Member
    • Topics: 70
    • Replies: 97
    • ☆☆

    Thank you very much.

    February 18, 2018 at 9:42 am #437842
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Interest rate RM’ is closed to new replies.

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