Forex And Interest Rates Illustration 5
From the following data decide on the best alternative for borrowing INR 4 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% – 6.00% |
| USD INR |
46.65/46.66 |
46.96/47.00 |
4.25% – 4.50% |
| EUR INR |
64.00/64.10 |
64.28/64.32 |
4.75% -5.00% |
| GBP INR |
95.25/95.30 |
95.36/95.46 |
5.25% – 5.50% |
(Ans.: 120000, 120686, 120500, 119061. Borrow in GBP)
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