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Respected Sir,
In q:23 part b (2),Lock in rate :
Spot rate. 1.1585. Or. 0.8632
Futures . 1.1553. 0.8656
……………. …………..
Basis. 0.0032. (0.0024)
…………. ……………..Lock in rate:
Spot. 1.1585. Or. 0.8632
Expired basis (0.0024). 0.0018
…………….. ……………
1.1561. 0.865= Eur 20,000,000*1.1561 =. $23,122,000
Or Eur 20,000,000/0.865 = $ 23,121,387
My question is that why do I get different answers with both lock in rates. Apparently these are same spot or futures rates. The answer in kit is $ 23,121,387. If I solve the question with lock in rate 1.1561 would it be considered correct?
Sorry, but I only have the BPP Revision Kit – not Kaplan. If it is a past exam question then tell me which exam and I will be able to find it.
If you are given the spot rate at the date of the transaction then you must use the spot rate and calculate also the gain or loss on the futures. If you are not given the spot rate at the date of the transaction, then you have no choice but to use the lock-in rate.
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