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Keshi Dec 2004 – Option

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Keshi Dec 2004 – Option

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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    Posts
  • July 2, 2023 at 9:05 am #687559
    phuongmore
    Participant
    • Topics: 132
    • Replies: 128
    • ☆☆☆

    Please explain :

    1. why the answer does not take into account of 96 option calculation (only take into account of 95.5 option).

    2.When not exercise the option, it is not always necessary to calculate loss on option ?

    3.Regarding to mention of buy/sell put/call option, can I just say “buy put option” or I must explain ” Keshi needs to hedge against a rise in interest rate, hence it needs to buy put option”.

    Thank you

    July 2, 2023 at 9:55 am #687565
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54671
    • ☆☆☆☆☆

    1 The answer shows the calculations for both exercise prices.

    2 If the option is not exercised then there is no loss on the option (but the premium is of course still paid).

    3 Yes you can. There is no need to explain why.

    July 2, 2023 at 10:49 am #687567
    phuongmore
    Participant
    • Topics: 132
    • Replies: 128
    • ☆☆☆

    1. Actually, the answer in Revision Kit has not show the calculation of 96 option. I must show this calculation in the exam to gain full mark ?

    July 3, 2023 at 9:07 am #687585
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54671
    • ☆☆☆☆☆

    For full marks you should show both. However just showing for one exercise price would get more than half the marks allocated for the options because the main thing is to prove that you understand how options work.

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