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`lock in rate

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › `lock in rate

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by John Moffat.
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  • November 12, 2023 at 10:46 am #694704
    UdayRajesh16
    Participant
    • Topics: 2
    • Replies: 0
    • ☆

    Hi i had a doubt regarding the qn forngoch co , the normal formula to calculate lock in rate is ,
    spot – futures to get the basis of the current month . i did have a doubt while solving frongoch i got the unexpired basis as negative , so if the unexpired basis is negative to do lock in rate do we put . Future price +(-unexpired basis)?

    November 13, 2023 at 3:40 pm #694768
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54831
    • ☆☆☆☆☆

    Yes. The spot rate and the futures price will get closer together, but whichever is currently higher will always be higher, and the ‘lock-in’ rate will always be between the two 🙂

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