- February 26, 2021 at 10:55 am #611785accacactusMember
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Good day to you!
Inside this article, the examining team provided a model answer to questions involves recommending hedging method.It mentioned that “You should assess, for all the hedging instruments, what will happen if interest rates rise or fall.” followed by the full calculation for FRA and futures under both scenarios(Interest rate increase and decrease).But since both methods effectively fixed the interest rate and the lock in rate can be determined by the lock-in-rate formula,do we still need to do the full calculation for both situations to gain full marks? or presenting the final effective rate will be sufficient?
Thank you for your time.February 26, 2021 at 2:43 pm #611822John MoffatKeymaster
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The final effective rate is sufficient in the exam unless the question does ask for the full calculations in $’s 🙂
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