The exhibit below shows quoted fixed borrowing rates (adjusted for taxes) in two

Question

The exhibit below shows quoted fixed borrowing rates (adjusted for taxes) in
two different currencies for two different firms:
                        Yen    Pounds
Company A       2%     4%
Company B        3%    5.5%
Which of the following is true?

Question options:

1)

2)

3)

4)

1)

Company A has a comparative advantage borrowing in both yen and
pounds.

2)

Company A has a comparative advantage borrowing in pounds.

3)

Company B has a comparative advantage borrowing in yen.

4)

More than one of the above is true

Explanation / Answer

Ans option A

Company A has comparative advantage in borrowing in both currencies as interest rate company A is getting is less than company B is getting

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