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Hi,
I would like to know how to determine which is the borrowing rate and which is the lending (deposit) rate from the question from the market interest rates given. i.e
$ 12%-14% p.a
£ 10%-11 1/2% p.aThanks!
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The interest rates given in the exam are ALWAYS expressed in ANNUAL terms.
The Borrowing rate is ALWAYS the HIGHER rate
Consequently, the Deposit rate is the LOWER of the two rates quoted.
So, for the $ the Borrowing rate is 14% PA or 3.5% for 3 months (i.e. 14/4)
Likewise, the deposit rate in £ is 10% PA or 2.5% for one quarter (10/4)
Regards, Kevin Kelly
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