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Predicted future rate and Expected future price ( Future contract)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Predicted future rate and Expected future price ( Future contract)

  • This topic has 0 replies, 1 voice, and was last updated 4 years ago by Nhan.
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  • September 7, 2018 at 1:12 pm #472065
    Nhan
    Member
    • Topics: 4
    • Replies: 7
    • ☆

    Dear tutors,

    I am confused that

    i) Question 4 – Specimen Sept 2018, using Futures contract, calculating the future rate in four month’s time = spot rate + ((future rate – spot rate)*4/6) with future rate in the six months’ time.

    ii) whereas for the interest rate using the future contract:
    In the case of interest rate increasing by 1.1% to 5.3%
    Why we calculate the future price on 31 Jan 2018 = Spot price + basis * 4/6 ( Now: 01 Oct 2017? Instead, we must calculate based on the 5.3% and minus unexpired basis?

    Thanks your for your explaination.

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