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Hi,
im using kaplan text books and have been all through ACCA. Cutting short to the story, im confused in the examples in F9 and P4 kaplan text book.in money market hedge where you RECEIVE money, in F9, the spot rate is given as
1.7 – 1.7040. now, when converting from USD to sterling, the example uses the sell spot rate which is 1.7040- as we will deposit pounds.
however in P4,
:
1.8890 – 1.8920. the example uses 1.8890 buy spot rate.
this is really confusing.please can someone clarify in terms of receipts, which spot rate to consider.
Thanks a ton. i have searched online but getting some very lengthy theoretical papers and i dont have time for that right now.THANKYOU
Hey,
It has to be 1.8920, because u sell usd to get sterling. Unless u have to deposit usd now which is due to be received in few months.
U are not getting the payment now, so u deposit now. To deposit now, its ur own money which is sterling that needs to be converted into usd. For that u use 1.8890. If u borrow now, use 1.8920. It would be better if u post this on the Ask The Tutor forum
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