Bpp kit page 66 ..question 241
Sir in the answer part.. the spot rate fron sterling to dollars used is 2.. but as we are buying foreign currency dont we have to use $1.96 spot rate.. Sir i have listened to your lecture on this topic . But i get confused on this particular question.
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Money market hedge
9y ago#1If we are buying euros (and therefore selling $'s) then we will use the rate of $2 to the euro.
Think about it - it must be whatever is worse for us (because the reason for the two rates is for the bank to make a profit). It is worse for us to pay $2 for every euro than to pay only $1.96 for every euro :-)
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