Question
Assume the U.S. interest rate is .075, the New Zealand interest rate is 0.055, the spot rate of the NZ$ is $0.58, and the oneyear
Assume the U.S. interest rate is .075, the New Zealand interest rate is 0.055, the spot rate of the NZ$ is $0.58, and the oneyear forward rate of the NZ$ is $.50. At the end of the year, the spot rate is $0.47. Based on this information, what is the effective financing rate for a U.S. firm that takes out a oneyear, uncovered NZ$ loan?
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Financial Management
Authors: Geoffrey Knott
4th Edition
1403903824, 9781403903822
