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KENDURI CO (JUN 13)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › KENDURI CO (JUN 13)

  • This topic has 3 replies, 2 voices, and was last updated 6 months ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • July 5, 2022 at 1:50 pm #660005
    Frooti
    Participant
    • Topics: 80
    • Replies: 75
    • ☆☆

    if it’s put option should not it be like this
    Strike price 1.6
    Sell of options 1500000
    Premium -19575.85644

    Net result 1480424.144

    instead of whats given in exam kit –
    £ payment = 2,400,000/1.60 = 1,500,000 or 24 contracts
    24 put options purchased
    Premium payable = 24 × 0.0208 × 62,500 = US$31,200
    Premium in £ = 31,200/1.5938 = £19,576
    Total payments = £1,500,000 + £19,576 = £1,519,576

    July 5, 2022 at 4:02 pm #660017
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51555
    • ☆☆☆☆☆

    Whether or not they exercise the option they have to end up paying money. If the exercise the option then they convert the $’s at the exercise price. If they don’t exercise then they end up converting at whatever spot happens to be.

    Therefore if they exercise the option they end up paying pounds and as always will end up paying the premium also. Therefore the final total payment is the total of the two.

    July 6, 2022 at 7:56 am #660060
    Frooti
    Participant
    • Topics: 80
    • Replies: 75
    • ☆☆

    yes but it should be 1500000-19575.85644= 1480424.144
    as put is sell so it should be + , then why is it given –

    July 7, 2022 at 8:28 am #660100
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51555
    • ☆☆☆☆☆

    No. They are paying 1500000 and they are paying 19575. So the total payment is the two added together.

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