Assume the UK One-Year Interest Rate Is 8 Per Cent

Multiple Choice

Assume the UK one-year interest rate is 8 per cent, and the euro one-year interest rate is 6 per cent. The one-year forward rate of the euro is £0.67. The spot rate of the euro at the beginning of the year is £0.65. By the end of the year, the euro's spot rate is £0.68. Based on the information, what is the effective financing rate for a UK firm that takes out a one-year, uncovered euro loan?

A) About 12.4%
B) About 7.1%
C) About 13.5%
D) About 10.9%
E) About 11.3%