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An Iraqi company is expecting to receive Indian rupees in one year’s time. the spot rate is 19.68 Iraqi dinar per 1 India rupee. The company could borrow in rupees at 10% or in dinars at 15%
my answer is 18.82 Iraqi dinar= 1 indian rupee.
but the real one is 20.58.
I set the base country Iraqi
but it is said the base country is India.sir, they don’t even let me know the base country i. Most likely they let me guess what the base country is.
most of the questions are like that.
what’s wrong with them….
always thanks for your tips and comments sir.
I do suggest that you watch my free lectures on this (and the lectures on the management of foreign exchange risk), because I make it clear in the question that the ‘base’ country is the one that the other currency is being quoted against.
Since 19.68 dinars is 1 rupee, then India is the base country. A quote of dinar/rupee 19.68 would mean exactly the same. i.e. 19.68 dinars = 1 rupee and again India is therefore the ‘base’ country.
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