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Hello sir ,i want to make my points clear about money market hedging, because while doing questions it gets messy and i end up with a wrong answer (i have watched your lectures on this , while receiving its fine but just confused about the borrowing and depositing rates and while paying should i always work backwards?
1) When we are borrowing lets say US dollars so use the borrowing rate of US and when we are lets say depositing pounds we use the UK depositing,is that correct or we use the borrowing and depositing rate in the country we(company) are in?
2) And in the case of paying money ,do we always have to work backwards ?
1. Yes – you use the rates for whatever currency you are borrowing or depositing in (not what country you are in).
2. Yes you do 🙂
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