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  1. Sir please help me with this…! your lectures were very clean and clear,but when it comes with a different currency its very very confusing…. i just don’t know what to borrow and what to deposit and also from where to borrow?? haha please read the question and make me understand this..thanx in advance
    A company whose home currency is the dollar ($) expects to receive 500,000 pesos in six months’ time from a
    customer in a foreign country. The following interest rates and exchange rates are available to the company:
    Spot rate 15·00 peso per $
    Six-month forward rate 15·30 peso per $
    Home country Foreign country
    Borrowing interest rate 4% per year 8% per year
    Deposit interest rate 3% per year 6% per year
    Working to the nearest $100, what is the six-month dollar value of the expected receipt using a money-market
    hedge?

  2. sir,could you explain me in money market hedge,say if we are receiving pesos and home country is US,in which currency are we borrowing?? say we are receiving 500,000 pesos in six months..so are we borrowing in pesos if so what rate do we have to apply,i mean is it home country’s borrowing rate or foreign country’s borrowing rate.., its very confusing!!

    • If we are receiving pesos on a future date, then we borrow pesos now (at the peso interest rate), so that we can convert to $’s now (at the current spot rate) and then invest the $’s at the $ interest rate,
      When we actually receive the pesos, we use them to repay the peso borrowing.
      At the same time, the $ deposit matures, so we receive $’s.

  3. I tend to believe that this tutor has an astonishingly excellent understanding of what he is teaching. Maybe this is not because he studied well but more importantly he has real life experience of everything…………….Thank you so much for delivering such a masterpiece video…………..

  8. What a Great Lecture! Love You Sir John <3

    I have 1 Question to ask, The Interest Rate for 3 Months you calculated 1.45%, Instead of writing 0.0145 (1.45/100) why you wrote 1.0145? similarly in 0.9% interest rate you wrote 1.009 instead of 0.009? it is a rule that you add 1 to every interest rate or am I missing something?

      • Hi John,
        Sorry, but I still don’t get this. I have the same question. i understand what you said “Multiplying by (say) 1.01 is the same as adding on 1%” but why we even add 1% or multiply with 1.01

      • You have not read my reply (or the original question) properly at all.

        When I put ‘say’ in brackets, then this means it is just an example.

        In the question that was asked, we were adding 1.45% and so we multiplied by 1.0145 to add on 1.45%. This is basic maths.

        (I assume that you have watched the lecture on which you are commenting?)

  9. Query: When i calculated my interest for the 3 months it was 0.9% (3.6* 3/12)….

    I am not clear why it is that when you were calculating the interest it was 3,194,954 x 1.009 and not 3,194,954 x 1.09.

    Please clarify.

  11. hi there
    Awesome lecture
    just one query !
    when we hedge a receipt , in the third step, when we multiply £ 3194954 with the interest rate we get £3223709. this amount is greater than what we require, the extra is the interest we received right? so why don’t we deposit an amount which after adding the interest becomes £ 3194954 ?? ie by dividing the amount by the interest rate ??

  13. sir….u said that lower interest rate is used for when you are borrowing money and higher when you are depositing money…so in example 6 instead of using 5.2% you used 5.8%…can you explain why? or is it am i understanding this wrong…thank you

  19. if i get a chance i would kiss you …………..
    jokes apart……… want to see knighted by the queen of england……………..u r a boon to students……guess what… i pay and get sub standard lectures…………………

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