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Money Market Hedge (BPP Dec 2016 Mock exam)

This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.

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June 6, 2021 at 11:56 pm #623543
yellowting
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Hi sir,
May I ask for Section B Q16 of the Dec 2016 paper (pg 293 of BPP Kit), why do we not need to divide the interest rates used by 2?
The question stated six-month interest rates as 4% (Borrow Dinars) and 0.5% (Deposit dollars). But why do we not use 2% and 0.25% instead?
Thank you in advance!
June 7, 2021 at 8:36 am #623585
John Moffat
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They really should have used 2% and 0.25%.
Their excuse would be that the interest rates did not say p.a. (per annum) against them, but it would be normal to assume that they were quoted as yearly interest rates. It will not be a problem in the real exam.
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