Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Money Market Hedging.
- This topic has 3 replies, 2 voices, and was last updated 6 years ago by
John Moffat.
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- January 16, 2019 at 8:09 am #502193
Sir, Example 6 In Open Tuition Book. Chapter 23.
So Since We Are Hedging Receivable We Are Going To Create A Liability Of Amount Such That Principal + Interest Is Equal To Amount Of Receivable.
Now The Amount Is $5M.
Interest. = $5M * 1.45% (3 Months) = 72500.
So The Principal Amount (Loan Taken) Should Be $ 4927500.
This Doesn’t Match With Solution In Book.
January 16, 2019 at 3:43 pm #502287It doesn’t match because what you have written is not correct!!
Interest is charged on the amount borrowed. If they were to borrow your figure of $4927500 then the interest would be 1.45% x 4927500 = 71448.75 and so they would not end up owing a total of $5M.
As I replied to you yesterday, you must watch the free lectures where I work through the examples.
There is no point using the notes without watching the lectures because it is in the lectures that I explain and expand on the notes. If you are not watching the lectures for any reason then you must buy a Study Text from one of the ACCA approved publishers and study from there.January 16, 2019 at 4:37 pm #502314Thanks Sir. I Do Watch Your Lectures. I Might Have Just Skipped This Point. Apologies!
January 17, 2019 at 8:46 am #502403No problem, and you are welcome 🙂
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