- This topic has 0 replies, 1 voice, and was last updated 9 years ago by .
Viewing 1 post (of 1 total)
Viewing 1 post (of 1 total)
- You must be logged in to reply to this topic.
OpenTuition recommends the new interactive BPP books for September & December 2024 exams.
Get your discount code >>
Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Lock In Rate
Hello Mr Moffat,
Sir i just got confused regarding the question you did earlier on the new topic of Lock in rate, when calculating the profit or loss on the futures
$1M / 1.5 = £666,667
£666,667 * (1.51-1.47) = $26,667
$26,667 / 1.52 = £17544
The company was expecting to receive $1M in August, so the company is worried the exchange rate would rise, that is why they bought Sept Futures, any potential gain made on futures will offset the potential loss on the transaction.
My question is i thought since the company will buy the futures, the $1M should be divided by the Sept Futures on 1 April which will be as follows
Buy Sept Future on 1 April : $1M / 1.47 = £680,272
Calculating G/L on futures on 1st Aug : £680,272 * (1.51-1.47) = $27,211
$27,211 / 1.52 = £17,902
Kindly unfold my ambiguity.
Thanks
Soud Saeed.