Dec 2014 Section A Question 4

Hi John,

Hope you doing well, kindly help me fix this, I cannot get to understand the rationale behind the ACCA answer. You are doing a great job and OT has been a part of my successes so far.

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?

A $32,500
B $33,700
C $31,800
D $31,900

Please why did ACCA use 8% (foreign country rate) to calculate the borrowing rete. I was thinking it was supposed to be foreign currency or we should use 4%.