Question
A man needs 50 million in 2 months for a 8-month period to finance a sushi restaurant in City Z. He wants to lock in
A man needs ¥50 million in 2 months for a 8-month period to finance a sushi restaurant in City Z. He wants to lock in the rate for a Euro yen loan over the borrowing period today. The current 2-month annualized Euro yen loan rate is 6.3% and the 10-month annualized Euro yen loan rate is 7.245%. What is the interest rate (annualized) the man can lock in based on these rates through money market transactions? Suppose the Bank of Hero Association offers a forward forward that fixes the loan rate at 6.1695942602672%, should the man take this contract?
Select one or more:
a. 7.404%
b. 7.055%
c. 1.333
d. 4.936%
e. Yes, the man should go for the forward forward contract with the Bank of Hero Association
f. No, the man should lock in a rate through money market transactions
g. Not enough informationrn
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Microeconomics
Authors: Paul Krugman, Robin Wells
3rd edition
978-1429283427, 1429283424, 978-1464104213, 1464104212, 978-1429283434
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