Exhibit 20-1 Assume a U.S.-Based MNC Is Borrowing Romanian Leu (ROL) at (ROL)

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.
-Maston Corporation has forecasted the value of the Russian ruble as follows for the next year: If the Russian interest rate is 30%, the expected cost of financing a one-year loan in rubles is:

A) 27.14%.
B) 32.86%.
C) 26.10%.
D) none of the above