Forex And Interest Rates Illustration 4

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From the following data decide on the best alternative for investing 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% – 6.00%

USD INR

45.8830/45.8860

46.2330/46.2360

4.25% – 4.50%

EUR INR

62.2545/62.2575

62.5545/62.5575

4.75% -5.00%

GBP INR

91.4750/91.4780

91.6750/91.6780

5.25% – 5.50%

(Ans.: 57,500, 57,946, 57,268, 56,920. Invest in USD)

 

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