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.
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Hello Sir John…
plz kindly explain & check ans for me
XYZ co operating in UK export $300000 to USA.If receipt in £ after 3months use MMH is taken.
$ borrow 5% – $ lending 4%
£ borrow 8% – £ lending 7%
Spot rate given 1.6 -1.61$/£
A.£189884
B.£187256
C.£193502
D.£188425
Ans key is B in Above Que.
But when i was calculated.
1.Borrow 300000/1.01=297030
2.Convert 297030/1.6=185644
3.Deposit 185644×1.02=189356
My Answer is 189356.
plz advice for my calculation method is true or false.
Hoping…If they are receiving $’s in 3 months time, then they will borrow dollars at 1.25%, and they will deposit pounds at 1.75%
When converting the $’s to pounds, the exchange rate to use is 1.61, not 1.60 (they are selling dollars to buy pounds).
Your answer has them borrowing $’s at the deposit rate, and then borrow pounds as well !!!
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