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Hi Sir,
The question is; US company bought good from foreign supplier and must pay 4m pesos in 3 months.
I assumed as they are paying;
1) borrow the amount in dollars
2)Covert the dollar to pesos at spot rate
3)Then put pesos on deposit in foreign bankHowever in the answer they are;
1) 4m pesos ÷ deposit of peso %
2) convert peso to dollar
3) dollar multiply by dollar interest.This doesn’t make sense.(It’s in the BPP text book page 400).
I have watched your videos and notes.
Would you please explain where I’m going wrong. Thank you in advance!
It makes sense because how do you know how many dollars you need to borrow?
You have to work out how many pesos need to be deposited so as to have 4m in 3 months time.
Then you know how many dollars need converting and therefore how many dollars need borrowing.I suggest that you watch the lectures again because I work through an example where money is being received and another example where money is being paid (as in this case).
Oh yeah never thought of that.
Yeah I think I need to watch the lectures again.Thank you sir.
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