Multiple Choice
Exhibit 20-1
Assume a U.S.-based MNC is borrowing Romanian leu (ROL) at an interest rate of 8% for one year. Also assume that the spot rate of the leu is $.00012 and the one-year forward rate of the leu is $.00010. The expected spot rate of the leu one-year from now is $.00011.
-Refer to Exhibit 20-1. What is the effective financing rate for the MNC assuming it borrows leu on an uncovered basis?
A) about 10%.
B) about -10%.
C) about -1%.
D) about -2%.
E) none of the above
Correct Answer:
Verified
Correct Answer:
Verified
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