Question
12). Assume U.S. interest rate is 7.5%, New Zealand rate is 6.5%, the spot rate of the NZ$ is $.52, and the one-year forward rate
12). Assume U.S. interest rate is 7.5%, New Zealand rate is 6.5%, the spot rate of the NZ$ is $.52, and the one-year forward rate of NZ$ is $.50. At the end of the year, the spot rate of NZ$ is $.48. Compute effective financing rate for a U.S. firm that takes out a one-year, uncovered NZ$ loan?
a) 1.7%.
b) 0.0%.
c) 14.7%.
d) 15.4%.
e) 8.3%.
15). Assume Jelly Corporation, a U.S.-based MNC, obtains a one-year loan of 1,500,000 Malaysian Ringgit (MYR) at a nominal interest rate of 7%. At the time the loan is extended, the spot rate of the ringgit is $.25. If the spot rate of the ringgit in one year is $.28, the dollar amount initially obtained from the loan is $________, and $_________ are needed to repay the loan.
a) 375,000; 449,400
b) 449,400; 375,000
c) 375,000; 5,375,143
d) 5,357,142; 6,000,000
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