Question
A French company has decided to sell its British subsidiary for GBP100m due to Brexit. The transaction requires regulatory approval and will complete in exactly
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A French company has decided to sell its British subsidiary for GBP100m due to Brexit. The transaction requires regulatory approval and will complete in exactly one years time. Scrooge Bank quotes the GBP:EUR spot rate at 1.1650, 1 year EUR interest rate at 2% and the 1 year GBP interest rate at 4%.
b) The treasurer decides to borrow GBP and sell it for EUR spot. What amount of GBP should she borrow so that the 100m received in a year repays the principal borrowed plus interest?
GBP 96.1538m
GBP 98.0392m
The answer cannot be computed from the data given
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