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Hi, in question 23 of the specimen exam, why is the answer using Borrow Dollar interest rates and Deposit Peso interest rates instead of Borrow Peso interest rates and Deposit Dollar interest rates?
Based on my understanding, we need to borrow peso, then convert to dollars and deposit in dollar, isn’t it? The q25 of the specimen is exactly same as my understanding.
The company works in dollars.
To be able to pay the interest in Pesos they need to borrow dollars, convert to Pesos, and then deposit the Pesos.
Have you watched my free lectures on money market hedging?
Hi sir, yes I have watched your free lectures on money market hedging.
So for the payment, we will go the opposite way which is, borrow in dollars, then converts to pesos and deposit in pesos.
While for the receive receipt, we will borrow pesos, then convert to dollars and deposit in dollars. Am I correct, sir?
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