Assume a U.S.-based MNC is borrowing Romanian leu (ROL) at an interest rate of 8% for one year. Also assume that the spot rate of the leu is $0.00012 and the one-year forward rate of the leu is $0.00010. The expected spot rate of the leu one year from now is $0.00011.

What is the effective financing rate for the MNC assuming it borrows leu on a covered basis?

a. 10%

b. 10%

c. 1%

d. 1%

e. None of these choices are correct.