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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