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Hi Sir, in the question (a) regarding the future hedging part, can we just ignored the “lock-in-rate) part.
We assumed that in 1 November , spot rate is 1.5374 (get from forward market), future rate is 1.5296 (after calculate the basis risk), then follow whatever u teach in your lecturer video.
and can we ignore the over/under hedge on forward market too?
You can’t assume that the forward rate will also be the spot rate (although if you did this you would not lose many marks).
The under/over hedge calculation is not so important, but it is a good thing to mention even if you do not do any calculations for it.
can we just ignored the “lock-in-rate” part?
i dunno what is the useful of lock in rate in this part answer
No – you can’t ignore the lock-in rate. Using futures is one of the most important ways of hedging the risk, and you need the lock-in rate.
My lectures on lock-in rates will help you understand them.
when we calculate the number of contract , why we need to use 4124236 / lock in rate 1.5353 / 62500, why not like normal 4123236 / future price 1.5275 / 62500? (i refer to bpp answer , i can’t find the original acca answer from google)
i watched your lecturer video lock in rate, it mentioned it is effective fixed exchange rate on the date of transaction but i still confused the purpose of lock in rate in this question.
There are arguments for using either rate in calculating the number of contracts, and you would get the marks for using either.
The lock-in rate is used to calculate the effective result of using futures (i.e. the net result of converting at whatever the spot turns out to be together with the profit or loss on the futures deal).
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