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Sir we are given the Spot rate and future rate ,so why did the examiner, when calculating the lock in rate used the march future rate of 1.0345 and not the Spot rate of 1·0292 .can we use future rate in other questions like that instead of spot ?
Also Sir we are asked about if the option is not exercised then what will be the outcome?
in the model answer they have done it like this12,692,225 = 12,250,000x – 105,350
12,250,000x = 12,692,225 + 105,350
so that x is US$1·0447 = CHF1.Or
12,688,550 = 12,250,000x – 105,350
12,250,000x = 12,688,550 + 105,350
so that x is US$1·0444 = CHF1.from where that US $ 1.0447, and US$1·0444 came from?
Additional Question to the first one: I can see that the examiner did an alternative solution using the current spot(which is what I would have done too) but I assume that if I do this in the exam, I still get full marks right?
Regarding your first and third questions, you can calculate it either way and will still get the full marks.
For your second question, if 12,250,000x = 12,692,225 + 105,350
Then 12,250,000 x = 12,797,575
Therefore x = 12,797,575 / 12,250,000 = 1.0447It is the same workings in the second case,
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