3-A Novak Djokovic wants to start a tennis academy in India and is looking for funding options. He finds that the interest rates in India are around 12% per annum. Lenders in his parent country, Serbia are willing to extend similar loans at 3% per annum.

a. Advise him on the suitability of the two options.

b. If 1 Serbian Dinar can be bought in the spot market for Rs 0.72 and in the 3- month forward market at 0.78, calculate the annualised forward premium/ discount of the rupee to the Serbian Dinar.