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What is your rule on FX rates? Very easy question please

Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › What is your rule on FX rates? Very easy question please

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by annchen.
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  • September 6, 2018 at 1:20 pm #471832
    anasalkhalaileh
    Member
    • Topics: 19
    • Replies: 29
    • ☆

    I am not sure which to use;

    Three-month forward rates $1·1559–$1·1601

    Receiving 20 million euros.

    Can anyone help? Thanks.

    September 6, 2018 at 5:50 pm #471912
    annchen
    Participant
    • Topics: 9
    • Replies: 15
    • ☆

    You are missing the other CCY in your forex.

    Is the rate expressed in USD/ EUR or EUR/ USD?

    Let’s say it’s real life and that would be USD/ EUR. In this case you sell the contract currency to the bank, so you use the first rate. You multiply the 20 Mio EUR to the first rate.
    You can easily asses this, as you will get less USD than if you used the other rate. The bank always wins!

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