Forums
Can RIL enter into a cap option with SCB itself?
AFM
answered on 12-Jan-25 17:21
Can RIL enter into a cap option with SCB itself, i.e. the bank that provided the loan or does it have to be a different bank?
latest answer
You can do with same bank too. I explained as diff bank for ease of understanding
Manu Jacob
CA Final
★ 6K+
1
270
Forex
AFM
answered on 12-Jan-25 08:31
Can this question be solved like this?
latest answer
Ok sir
Vigneshwar M
CA Final
★ 2K+
5
284
Direct Quote ?
AFM
answered on 11-Jan-25 14:04
Sir in this sum @ 2:20 minute in the video , You have mentioned INR JPY as Direct Quote. But Peacock Ltd is an Indian Company which is trying to cover in that case for an Indian Company INR JPY is Indirect Quote right?
latest answer
Yes. Will get it corrected - good catch
Mohanbabu N
CA Final
★ 3K+
1
270
Options - Dividend
AFM
answered on 11-Jan-25 10:05
If Dividend or yield rate is given under Risk neutral (OR) Delta hedging, what are the areas to be adjusted to calculate value of option at the beginning? Should we adjust only the current spot S0? or both current spot and expected spot prices S0u, S0d as well? Kindly share any such illustrations, if available.
latest answer
If it is already known that dividend will be paid, the strike price & option already take that fact into account. Because if you know about dividend everyone else in market will know about it. So prices are adjusted So you will adjust it only from current spot and not from Expected spot So p will 0.4225 & Option value will be 6.26
Durai Murugan
CA Final
★ 470
3
340
Why did we not consider cash flow is 50k plus loss of 16.625k
AFM
answered on 10-Jan-25 11:21
Why did we not consider cash flow is 50k plus loss of 16.625k for a total of 66.625 k as total cash flow. I did not not understand part 3. Please explain.
latest answer
Net loss is 16625 In between movements are just CF changes. Net CF changes works to loss of 16625. So you cannot add both In part 3 if initial OF is 50000 & Loss is 16625 then inflow at end is 33375 In part 3 if initial OF is 75000 & Loss is 16625 then inflow at end is 58375 When you enter into a futures contract there is only margin and not investment for value of future But icai considered it in some old exam so i am showing just to showcase how ICAI solved the question
Manu Jacob
CA Final
★ 6K+
1
245
3 Month Spot & 3 Month Future Rate.
AFM
answered on 10-Jan-25 10:14
What's the difference between 3 Month Spot & 3 Month Future Rate? what differs?
latest answer
Diff
Mohanbabu N
CA Final
★ 3K+
1
281
Timing Options
AFM
answered on 10-Jan-25 11:42
27. Illustration - Timing option Suppose MIS Ltd. is considering installation of solar electricity generating plant for light the staff quarters. The plant shall cost ₹ 2.50 crore and shall lead to saving in electricity expenses at the current tariff by ₹ 21 lakh per year forever. However, with change in Government in state, the rate of electricity is subject to change. Accordingly, the saving in electricity can be of ₹ 12 lakh or ₹ 35 lakh per year and forever. Assuming WACC of MIS Ltd. is 10% and risk-free rate of rate of return is 8%. Decide whether MIS Ltd. should accept the project or wait and see. In this Qn, Npv at year 0 = -0.4 Crores present value of option is arrived at 18.48 lakhs. "Option has +ve Value hence the company should wait and decide". Sir why are we waiting? Is it because timing option is American call? or any other reason?
latest answer
Thankyou sir
Durai Murugan
CA Final
★ 470
3
551
We have gotten into a future contract to sell the rice at 59 per kg but why are we repurchasing it again and selling it again?
AFM
answered on 10-Jan-25 10:22
We have gotten into a future contract to sell the rice at 59 per kg but why are we repurchasing it again and selling it again? We already had physical possession of the rice so only physical delivery was required. Why did we buy it back ? Please explain
latest answer
Futures
Manu Jacob
CA Final
★ 6K+
1
262
NAV
AFM
answered on 09-Jan-25 17:52
Why the NAV given in question is considered as before discount and premium at the beginning and end of the year? Whether the quoted price and market price are same? If not, what is the difference between them?
latest answer
Return
Malaivalar mangai
CA Final
★ 0
3
316
Why is it abondanmonent
AFM
answered on 09-Jan-25 16:19
The question says whether to enter into joint venture. So wouldn't we presume it is a call option? How do know if it is an abandonment or investment option?
latest answer
Good Question. In a groth option there is no subsequent sale of operations or business In this question it is vert clear that once investment is made, after 5 years there is an option to buy The phrase " option to buy out" after 5 years is the key. The growth decision has value based on option to be bought out hence the option is an abandonment option and not an investment soption
Manu Jacob
CA Final
★ 6K+
1
293