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A US company borrows British pounds for one year at 6 percent. The US one-year interest rate is 8 percent. The one-year forward rate of
A US company borrows British pounds for one year at 6 percent. The US one-year interest rate is 8 percent. The one-year forward rate of the pound is $1.93. The spot rate of the pound at the beginning is $1.95. The pound's spot rate is $2.05 by the end of the year. Based on the information, compute the percentage change in pound and the effective interest rate of the loan in US dollar terms.
5.1%, 10.0%6.1%, 11.4%5.1%, 11.4%7.0%, 12.0%8.0%, 12.5%
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