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Q:82 Kaplan kit (Dec 2013)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Q:82 Kaplan kit (Dec 2013)

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
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    Posts
  • October 26, 2017 at 4:28 pm #413318
    twilight1987
    Participant
    • Topics: 11
    • Replies: 14
    • ☆

    Respected Sir,

    I was a bit confused by the solution of part a of the question (Forward rate agreements ) so i solved it my simple way the way i have learnt FRA’s.

    FRA 3-7 4.82%
    Current Interest rate : 4.09%
    Bank has offered to invest at 20 basis points less LIBOR
    Case 1: if interest rate goes up by 0.9%

    Solution:

    Actual Interest (4.09+0.09) = 4.99%
    $48,000,000*4.99%*3/12 = 798,400

    Difference in FRA and current interest rate
    (4.99% -4.82% = 0.17%)
    We pay to bank the difference
    $48,000,000*0.17%*4/12 = (27,200)

    20 basis points reduced on actual interest by bank
    =0.20/100*48,000,000*4/12 = (32,000)
    ———————-
    $ 739,200.

    The answer is same.Can i use this format in exam.for me its v easy .

    Pls advice.

    Thanks

    October 27, 2017 at 7:25 am #413360
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54659
    • ☆☆☆☆☆

    Yes – your format is fine 🙂

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