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(5 pts) Suppose that on January 1st, the cost of borrowing Euros for the year is 18%. During the year, U.S. inflation is 5%, and

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(5 pts) Suppose that on January 1st, the cost of borrowing Euros for the year is 18%. During the year, U.S. inflation is 5%, and European inflation is 9%. At the same time, the exchange rate changes from EUR 1 $0.15 on January 1 to EUR 1 - $0.10 on December 31. What was the nominal cost of borrowing US dollars during the year? 6

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