CIMA Exam CIMAPRO19-P03-1 Topic 5 Question 58 Discussion

Actual exam question for CIMA's CIMAPRO19-P03-1 exam

Question #: 58
Topic #: 5

VBN's home currency is the V$. On 1 January, VBN must make a payment of C$2 million on 31 March of that same year.

On 1 January the spot exchange rate was V$1 = C$0.4.

On 1 January VBN paid $180,000 for a call option to buy C$2 million for V$5.5 million on 31 March. VBN's cost of borrowing was 8% per year.

On 31 March the spot rate was V$1 = C$0.45.

What was the total cost, including the cost of the option, of settling the payable?

AV$4.628 million

BV$5.684 million

CV$4.444 million

DV$5.5 million

Show Suggested Answer

Suggested Answer: B, C, D

by Andra at Dec 08, 2023, 10:03 AM

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10 hours ago

Ugh, why do they always make these questions so complicated? I just want a simple, straightforward answer.

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12 days ago

Hmm, this question seems a bit tricky. I'll need to carefully calculate the exchange rates and the cost of the option to determine the total cost.

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17 days ago

But the cost of the option was $180,000, so the total cost should be lower than that. That's why I chose A.

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21 days ago

I disagree, I believe the answer is B) V$5.684 million.

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24 days ago

I think the answer is A) V$4.628 million.

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