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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › OKAN (SEP/DEC 19)
The project is to start in 6 months time, and we will get the amount from Europe in 6 months.
The exchange rate given is of after 6 months time from today, so why isn’t a whole year’s inflation added to the rate instead of inflating it for just 6 months?
I am not sure that I understand your problem.
We are not inflating the exchange rate, and we are hedging for 6 months.
Therefore using forward rates we take the six month forward rate.
For money markets we use the current spot rate but account for interest for six months.