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Risk management

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Risk management

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by AvatarJohn Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
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  • February 4, 2018 at 5:34 pm #435076
    Avatarniki27
    Member
    • Topics: 82
    • Replies: 15
    • ☆☆

    Dear sir,
    I have a doubt with this question

    A UK company expects to receive $500,000 in 5 months’ time.
    Current Exchange rate 1.7456$/£ + 0.0002
    3 month exchange rate 1.7725$/£ + 0.0005
    9 month exchange rate 1.8035$/£ + 0.0005
    Calculate receipts in £ if forward hedge is taken (to the nearest ‘’000’’ round off)?

    My question is if its due in 5 months shouldn’t we get an exchange rate for 5 months? How do we solve the problem?

    Thanks!

    February 5, 2018 at 12:17 pm #435258
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54846
    • ☆☆☆☆☆

    We estimate a 5 month exchange rate by approximating between the 3 months and 9 month rates (by taking the 3 month rate and adding 2/6 of the difference between the 9 onto and 6 month rates)

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