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John Moffat.
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Sunit
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Dear Sir, In 2011 june Session examination question no. 4 named ZPS Co. i got confused about the Spot rate given.
Can you please have a lokk at that? please
John Moffat
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I am not sure which bit of it is confusing you.
If you are selling $’s and buying pesos then you convert at 12.500 pesos to the $.
If you are selling pesos to buy $’s then you convert at 12.582 person to the $.It will help you to watch the free lectures on foreign exchange risk management (obviously with the free lecture notes in front of you), because I spend time explaining which rate to convert at and whether to divide or multiply, before going on to go through the techniques of managing exchange rate risk.
Sunit
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It has said that Per$
Spot Rate:peso 12.500-peso 12.582I wonder that, Is that $ which is stronger or Peso seeing this Spot Rate.
as us said in lecture $/pound 1.5572 means
$1.5572= 1Pound,
i cant relate the given Spot Rate as above.In Step 2 of money market hedgeing we have to convert 4819277peso into $ using Spot rate. That means we are purchasing $.Since according to you i need to divide 4819277 by 12.582 isnt it. Make me correct if im wrong Sir.
(Im confused about buying & selling $ concepts)Yes im going through the lectures, the way you teach there is just awesome.
Thank you so much for the support u have been for studying Acca papersJohn Moffat
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It is not a question of which is ‘stronger’.
There are 12.500 – 12.582 pesos equal to 1 $.
In step 2 of the money market hedging, we are buying pesos (not $’s) so that we can then put the pesos on deposit and then in 6 months time use them to pay the interest.
Because we are buying pesos, we divide by 12.500 to convert to $’s.
Sunit
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