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Dear John,
In the Kaplan exam kit there a question FNDC PLC.
The company is borrowing $45m for 2 months.
The option premium is 0.015% per year.
The premium is calculated as $45mx0.015%x2/12.
I think this is not correct and should be $45mX0.015%X3/12 or
$45mx0.015/400.Please help me to understand whether it is a mistake within the exam kit?
I do not have the Kaplan books, but from what you have typed it seems that there is a mistake (and what you have written is correct).
Dear Sir,
I am looking at this question once more. It appears not to be a mistake.
The borrowing is $45m for 2 months and premium is 0.015%
Number of contracts is 60 and contract size is $500.000.
The premium can be calculated as
$45mX0.015%x2/12=$1125OR
60X$500000X0.015/400=$1125
I prefer the second one, the logic is easier.
Am I right?
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