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CIMAPRO19-P03-1 Exam - Topic 6 Question 43 Discussion

Kis a manufacturing company. It has sourced new equipment from the US to equip a new production facility.It has to make a payment of USD1,000,000 in3 months' time.K's production manager needs to know whether it is cheaper to use a forward contract or a money market hedge.Current spot and forward exchange rates are as follows:Current mid-point money market rates (annual) are as follows:Ignoring taxation, which of the following statements is correct?
A) The money market hedge saves GBP15,196 and B) The forward contract saves GBP2,629 and D) The forward contract saves GBP1,901
C) The money market hedge saves GBP32,078

CIMAPRO19-P03-1 Exam - Topic 6 Question 43 Discussion

Actual exam question for CIMA's CIMAPRO19-P03-1 exam
Question #: 43
Topic #: 6
[All CIMAPRO19-P03-1 Questions]

Kis a manufacturing company. It has sourced new equipment from the US to equip a new production facility.

It has to make a payment of USD1,000,000 in3 months' time.

K's production manager needs to know whether it is cheaper to use a forward contract or a money market hedge.

Current spot and forward exchange rates are as follows:

Current mid-point money market rates (annual) are as follows:

Ignoring taxation, which of the following statements is correct?

Show Suggested Answer Hide Answer
Suggested Answer: A, B, D

by Tiffiny at Dec 24, 2022, 10:40 AM

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Arlette
10 months ago
I heard the money market hedge is usually more cost-effective.
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Zona
10 months ago
Definitely leaning towards the forward contract saving GBP2,629.
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Inocencia
10 months ago
Wait, how can the money market hedge save that much? Sounds off.
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Rickie
11 months ago
I think the forward contract is the better option here.
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Maybelle
11 months ago
The money market hedge saves GBP15,196.
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Crista
11 months ago
I vaguely remember that the money market hedge could save a significant amount, maybe around GBP15,000, but I’m not confident about the exact figure.
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Hyun
11 months ago
I feel like the forward contract might save more, but I need to double-check the calculations we practiced last week.
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Natalya
11 months ago
I think we did a similar practice question where the money market hedge was cheaper, but I can't recall the specific numbers we used.
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Suzan
11 months ago
I remember we discussed forward contracts and money market hedges in class, but I'm not sure how to calculate the exact savings for each option.
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Mari
11 months ago
This is a good test of my string processing skills. I'm confident I can figure out the right approach here.
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Glenna
11 months ago
Hmm, I'm a bit unsure about this one. I know we can use the Business Manager to import/export site data, but I'm not sure if that's the right approach here. I'll have to think it through carefully.
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Chantell
11 months ago
I'll break this down step by step - first calculate EMI, then split interest and principal, and track interest paid in that specific financial year.
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Clay
11 months ago
I'm leaning towards Option B since it mentions both logging and emailing the admin, but I'm not 100% sure about the Compensating Service Transaction pattern.
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Lettie
1 year ago
Wait, are we supposed to use the spot rate or the forward rate? I'm so confused, I might just hedge my bets and go with option C.
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Leonardo
1 year ago
Sounds good, let's hedge our bets with the forward contract.
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Gwenn
1 year ago
I agree, let's go with option B then.
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Clemencia
1 year ago
I think we should use the forward rate for the calculation.
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Sharee
1 year ago
The forward contract saves GBP1,901? That's pocket change! I hope the other options are more substantial.
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Lorrine
1 year ago
User 4: Yeah, that seems like a small amount compared to the money market hedge.
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Viki
1 year ago
User 3: The forward contract saves GBP1,901
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Rebeca
1 year ago
User 2: That's a significant amount of savings!
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Tamra
1 year ago
User 1: The money market hedge saves GBP15,196
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Dacia
1 year ago
User 4: Yeah, that seems like a small amount compared to the money market hedge.
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Coletta
1 year ago
User 3: The forward contract saves GBP1,901
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Arlette
1 year ago
User 2: That's a significant amount of savings!
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Reena
1 year ago
User 1: The money market hedge saves GBP15,196
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Barrett
1 year ago
GBP32,078 saved with the money market hedge? That's a pretty hefty amount. I wonder if there's a catch.
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Crista
1 year ago
I agree, it's important to weigh the pros and cons of each option carefully.
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Jess
1 year ago
True, we should consider all factors before making a decision.
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Denae
1 year ago
Yeah, but we should also consider any potential risks involved.
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Socorro
1 year ago
But what if there are hidden costs or risks involved with the money market hedge?
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Joanna
1 year ago
It does seem like a significant saving with the money market hedge.
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Ines
1 year ago
I think the money market hedge is the way to go. GBP32,078 in savings is hard to ignore.
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Cammy
1 year ago
Forward contract saves GBP2,629? Hmm, that seems too low. I better review the exchange rates again.
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Rebecka
1 year ago
The money market hedge saves GBP15,196? I'm not convinced. Let's double-check the calculations.
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Boris
1 year ago
I'm not sure, but I think the money market hedge saves GBP32,078.
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Gilma
1 year ago
I disagree, I believe the forward contract saves GBP2,629.
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Sanda
1 year ago
I think the money market hedge saves GBP15,196.
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