3. (10 points) ABC Associates Inc. based in New York borrowed 10,000,000 for 3 years at a rate of 8.5% per annum. The spot rate at the beginning of the loan is $1.43/. If the pound depreciates 2% in the first year, and 4% during the next two years, what is the effective US dollar cost in % of this debt? (Assume ABC borrowed the pounds to convert them to dollars and use as a dollar loan. Also assume this is a non-amortizing loan). Why is the effective rate in dollars higher or lower than the 8.5%