An Indian exporting firm, Radhey & Sons exported dry fruits worth of AUD 1 million to an importer in Sydney. Radhey and Sons are worried about…

CA Final · Advanced Financial Management · RTP · May 2026
An Indian exporting firm, Radhey & Sons exported dry fruits worth of AUD 1 million to an importer in Sydney. Radhey and Sons are worried about likely depreciation of AUD in near future as it is likely that the export sum will be received after 3 months. Today as such as there is no derivative contract is available in AUD to hedge itself from such depreciation. The following data is given: Spot rate:64.00/AUD 3 months interest rates (per annuam): Deposit Borrowing ₹ 10% 12% AUD 4% 5% From the information given above, choose the correct answer to the following questions:
(A) borrow in domestic currency and invest foreign currency
(B) borrow in foreign currency and invest domestic currency
(C) borrow and invest in domestic currency only
(D) borrow and invest in foreign currency only

Suggested Answer and Working Notes:

Correct Answer: Option (B)

borrow in foreign currency and invest domestic currency

Topics: Foreign Exchange Exposure and Risk Management

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