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Hi sir ,
I was doing doing this qstn where they asked what is the cost in six months time of money market hedge.
So the answer is 169134$
But I don’t understand why when they calculate for borrowing they did
166225*3.5*6/12=169134I don’t understand why they use 3.5% instead of 8% as $ is home currency can you please explain e the reason behind this
They are borrowing $’s (so that they can convert now to €’s, invest €’s for 6 months and then pay the amount owing). The $ borrowing rate is 3.5%.
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