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hello, John,
could you please explain figures of 97.00 and 96.50 under the title of “exercise price” given by ACCA team in their answers to Q2 (b)? how could they possibly reach at those numbers? I can’t figure it out by myself.
Answers:
https://www.accaglobal.com/content/dam/acca/global/PDF-students/acca/p4/exampapers/P4_2015_dec-a.pdf
Question paper:
https://www.accaglobal.com/content/dam/ACCA_Global/Students/prof/p4/Exam%20docs/d15_hybrid_p4_q.pdfExercise price and strike price both mean the same thing – they are the fixed price at which you can buy or sell futures (depending on whether you buy a call option or a put option) on a future date if you choose to exercise the option.
97.00 and 95.50 are the only strike/exercise prices that are given in the question and therefore the only two used in the answer.
I do suggest that you watch my free lectures on interest rate risk management, because in the lectures I explain futures and options in detail, with examples.
oh, sorry, of course they are. I’m just awfully absent-minded, couldn’t see it at once. probably because I expected to see the strike on the left side of the table.
I’ve seen all your lectures and I find them very clear and helpful. now I’m studying for the exam with Kaplan publication, but whenever I’m not sure of the meaning one thing or another I refer to your lectures. thank you very much for being so helpful.
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