Question

Company A can borrow yen at 14.1 percent and dollars at 13.2 percent. Company B can borrow yen at 15.5 percent and dollars at 13.667 percent. At what interest rates, do company A and B respectively have a comparative advantage?

A; 13.2 percent, B: 15.5 percent

A: 14.1 percent, B: 13.667 percent

B has comparative advantage in both markets

A has a comparative advantage in both markets

Show Work Please

Answer 1

Borrowing in Yen for A is 14.1% while for B, it is 15.5%

So A has advantage in borrowing of Yen Currency in comparison to B.

Borrowing in Dollars for A is 13.2% while for B it is 13.667%

So A also has advantage in Dollar Currency borrowing in comparison to B

So A has comparative advantage in both Market.

Answer is D