- This topic has 2 replies, 2 voices, and was last updated 14 years ago by .
Viewing 3 posts - 1 through 3 (of 3 total)
Viewing 3 posts - 1 through 3 (of 3 total)
- You must be logged in to reply to this topic.
How was your exam? Comments & Instant poll >>
OpenTuition recommends the new interactive BPP books for December 2025 exams.
Get your discount code >>
Forums › ACCA Forums › ACCA FM Financial Management Forums › money market hedging… help please
in chapter 22 example 6 to get the amount to be borrowed, $5M is divided by 1.0145. we get the 1.0145 by dividing the US borrowing rate by 4 i.e 5.8%/4 and then we add one:
5.8% divided by 4 = 1.45% ( 0.0145 in terms of decimal)
we add one: 0.0145 + 1 = 1.0145
what I want to know is why we divide it by 4??????
Because the 5.8% is the annual borrowing rate but the transaction needs to be hedged for only 3 months = 1/4 of a year.
@ bridmw thanks a lot…