16). Morton Company obtains a one-year loan of 2,000,000 Sudanese Dinar (SD) at an interest rate of 6%. At the time the loan is extended, the spot rate of the dinar is $.005. If the spot rate of the dinar at maturity of the loan is $.0035, what is the effective financing rate for borrowing dinar?

a) 37.8%

b) 51.43%

c) 25.8%

d) 6%

e) None of the above

20) Assume that interest rate parity holds between the U.S. and Cyprus. The U.S. one-year interest rate is 7% and the Cyprus one-year interest rate is 6%. What is the effective financing rate of a one-year loan denominated in Cyprus pounds assuming that a US MNC covers its exposure by purchasing pounds one year forward?

a) 6%

b) 7%

c) 1%

d) More information required to answer