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OKAN (SEP/DEC 19)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › OKAN (SEP/DEC 19)

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by John Moffat.
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  • May 28, 2023 at 8:00 pm #685262
    simranxdeep
    Participant
    • Topics: 39
    • Replies: 59
    • ☆☆

    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?

    May 29, 2023 at 7:53 am #685281
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54835
    • ☆☆☆☆☆

    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.

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