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Dear sir,
Can I please ask for your help to understand Acca’s answer given to the prediction of the future rate for this question?
They are giving 2 ways, both as fas as I understand based on the logic of the basis that reduces linearly, one using the spot and one using the 3m futures price.
But I can’t understand how these fit with the (very logical) approach you presented in Chp 18 of your lecture for this prediction.Thank you in advance for your insight!
The answer has calculated the lock-in rate (as I illustrate with example 13 in the lecture), which is usually what is needed in recent exams.
You can calculate the same figure in different ways – the second method in the examiners answer is the one I explain in my lectures 🙂
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