A currency dealer has good credit and can borrow either, Ask an Expert

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A currency dealer has good credit and can borrow either $1,000,000 or €800,000 for one year. The one-year interest rate in the U.S. is i$ = 2% and in the euro, zone the one-year interest rate is i€ = 6%. The spot exchange rate is $1.25 = €1.00 and the one-year forward exchange rate is $1.20 = €1.00.

Identify in this case which currency is the borrowing currency and which is the lending (“investing”) currency

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Financial Management, Finance

Category:- Financial Management
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