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Investing Surplus Funds

Forums › FIA Forums › MA2 Managing Costs and Finance Forums › Investing Surplus Funds

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by Ken Garrett.
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  • April 14, 2021 at 8:07 pm #617660
    maximus07
    • Topics: 374
    • Replies: 379
    • ☆☆☆☆

    Sir what is Option deposits? I tried to google but found nothing except IQ option deposit mobile application.
    Can you please help me understand?

    April 15, 2021 at 7:36 am #617685
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 9977
    • ☆☆☆☆☆

    It normally means the payment of a cash deposit (by a buyer) in conjunction with a contract committing a seller to deliver goods, provide a service etc at a specified time.

    Its relevance to investing surplus funds is that it might be used to allow the company to fix a rate of interest for a deposit made in the future.

    Eg interest if rates are now 3%, paying an option deposit could guarantee you that rate in 3 months’ time when you have a cash surplus. Even if interest rates fell to 2% you could insist on 3%. If they rose to 4% you could simply ignore your option and invest at 3%

    All rather complicated for MA2!

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