Forex And Interest Rates Illustration 8


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Forex And Interest Rates Illustration 8

 

From the following data decide on the best alternative for borrowing INR 8 million for a temporary period of 6 months on a risk-free basis. Ignore transaction costs.

Currency

Spot

6 month forward

Interest Rates

INR

5.75% – 6.25%

USD INR

44.77/44.87

45.20/45.30

4.25% – 4.75%

EUR INR

63.90/64.00

64.32/64.42

4.75% -5.25%

GBP INR

92.90/93.00

93.23/93.33

5.25% – 5.75%

(Ans.: 230,000, 230,087, 230,950, 230,304. Invest in EUR)


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