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A European borrower borrows $5,000,000 from an American bank for one year. The interest rate is 7%. The exchange rate at the start of the
- A European borrower borrows $5,000,000 from an American bank for one year. The interest rate is 7%. The exchange rate at the start of the year is $258/ and is $215/ at the end of the year. What is the European borrowers EUR-denominated equivalent cost of borrowing? Please answer in PERCENT form.
Hint: This is similar to computing a $-denominated equivalent cost of borrowing for a U.S. firm.
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Financial Economics
Authors: Zvi Bodie, Robert C Merton, David Cleeton
2nd Edition
0558785751, 9780558785758
