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LIRIO (MARCH/JUNE 2016)/ BPP Q:56

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › LIRIO (MARCH/JUNE 2016)/ BPP Q:56

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • August 21, 2021 at 6:02 pm #632450
    naveez
    Member
    • Topics: 15
    • Replies: 13
    • ☆

    Hi Sir!
    Hope all is well!

    I have two doubts in relation to this scenario.

    Q1) I have used a different method to calculate the number of future contracts, as mentioned below, Could please confirm whether this method is applicable in the exam?

    =(EUR 20,000,000/EUR 0.8656) = $23,105,360

    = $23,105,360/$125000 = 185 contracts approx.

    Q2) I have computed the over hedged amount for future contracts. Please confirm whether I have done it correctly? Pls advise!

    Future Contracts (185contracts x $125000) = $23,125,000
    Expected Receipt = $23,121,387
    Over-hedged $3613

    Thank you in advance for your kind explanation!

    August 22, 2021 at 9:31 am #632498
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51545
    • ☆☆☆☆☆

    Q1. Strictly you should have calculated the number of contracts using the lock-in rate (as in the answer) although you would probably still get the marks.

    Q2. What you have done is not correct. Given that the receipt is in €’s, the over-hedge is in €’s and is the difference between the €20M and the number of contracts converted at the lock-in rate.

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