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FMF9 Mock Exam Question 3 query.

Eemmachiswell15y ago
On Q3. part c we are told to use the Market Interest Rates of:

$ Interest rates: 12% - 14% per annum
£ Interest rates: 10% - 11.5% per annum.

I have always been taught that Borrowing is on the left and Debt is on the right when using this format but the answer has the %'s the other way round ie 12% is the rate for Debt and 14% is the rate for borrowing.

How do we know which one is which and have I been taught incorrectly?

Emma
Bbridmw15y ago#1
Company always borrows at the higher rate and lends at the lower.

For currencies company always buy at the higher rate and sells at the lower rate.

You should shoot your tutor! Telling you left and right does nothing to aid the comprehension of the material and leaves you with another potential place for error or confusion in the exam.
Eemmachiswell15y ago#2
Cheers for this and the other answer! Lifesaver. Goodluck if you are sitting this exam too.

Em
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