Assume That the U

Multiple Choice

Assume that the U.S. interest rate is 11 percent while the interest rate on the euro is 7 percent. If a U.S. firm borrows euros, the euro would have to ____ against the dollar by ____ in order to have the same effective financing rate as borrowing dollars.

A) depreciate; about 3.74 percent
B) appreciate; about 3.74 percent
C) appreciate; about 4.53 percent
D) depreciate; about 4.53 percent