BPP Kit 2016/2017 Question 241
I don't understand why they converted at $2. It's a payment and as you explain, we use whichever rate is worse for us which will be the lower rate.
Also, why did they multiply rather than dividing in converting?
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Money Market Hedge
8y ago#1The question gives how many $'s are equal to 1 Euro.
This is a US company needing to pay in Euros.
So for every 1 Euro they need to pay $2's - we multiply because each Euro costs $2, and we convert at $2 because multiplying by 2 means they pay more than if we multiplied by 1.96 (which therefore the rate that is worst for them).
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