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When u do futures here,
This is wat I did—- Interest will be 34m*6/12*5.1%=867k
Then gain on futures is 34m* ((95.84-95.440)/400) = 34k
then net pay=833k
Is this correct??Question 2) here they asked us to do options as well and they have calculated the net borrowing cost under each strike price, but when u switch to Q2) of sept/dec 15 in the marking scheme they have calculated the total interest received?
here in this question u find the difference between the last interest and new interest and show the increased payments in the answer why is that?
No it is not correct.
The gain on the futures is 68,000 as per the answer.
(The borrowing is for 6 months and they are 3 month futures so you need 68 contracts, not 34).OKi as per yr lecture workings
I got that amount=== 68*1m* (95.84-95.440/400 )) = 68k gain but the interest cost is 867k
then net impact is wrong, in yr lecture workings u find the total interest to be paid plus the gain and gives net impact ryt?U havent answered my second question pls??
A gain is a receipt which reduces the net payment, a loss is a payment which increases the total payment. (And that is what I do in my lectures also)
Question 2: Because that is what the question asked for! The CEO specifically asked for the extra cost of borrowing, and you were asked to respond to the request.
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