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June 2011 – Q2 – estimating futures rate

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › June 2011 – Q2 – estimating futures rate

  • This topic has 0 replies, 1 voice, and was last updated 13 years ago by croatia.
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  • June 11, 2012 at 7:32 am #53321
    croatia
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    • Topics: 2
    • Replies: 0
    • ☆

    Dear Sir,
    I have a question about the difference in estimating futures rate in approach in lectures and examiners answer:
    In the lectures, approach is that today we buy/sell the future at the rate given, and then on the transaction date close the future at the estimated future rate. Future rate is estimated as basis today divided by number of periods till future expiration multiplied by number of periods between transaction (1/5 in June 2011 Q2 example) and future expiration, and then added to the forecast spot rate.
    In the examiners answer, given future rate appears to be assumed closing rate on the expiry (not the price of the future today), and to get the closing 1/5 of the difference between future and spot is deducted. There is no calculation of gain/loss on the closing of the future.
    Is there a reason why in Q2 June 2011 approach shown in the lectures cannot be used?
    Thank you

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