Financing with a Portfolio Pepperdine, Inc., considers obtaining 40 percent of its 1-year financing in Canadian dollars and 60 percent in Japanese yen. The forecasts of appreciation in the Canadian dollar and Japanese yen for the next year are as follows:

CURRENCY POSSIBLE PERCENTAGE CHANGE IN THE SPOT RATE OVER THE LOAN LIFE PROBABILITY OF THAT PERCENTAGE CHANGE IN THE SPOT RATE OCCURRING Canadian dollar 4% 70%

Canadian dollar 7 30 Japanese yen 6 50 Japanese yen 9 50 The interest rate on the Canadian dollar is 9 percent, and the interest rate on the Japanese yen is 7 percent. Develop the possible effective financing rates of the overall portfolio and the probability of each possibility based on the use of joint probabilities.