Capital ltd is a fast growing ghanaian multinational compny looking for short term working capital loan to support its expansion to other west african countries. You have just been hired as a senior financial analyst to help the firm secure a cheap source of funding to achieve its objective. The CEO of this company is concerned about the high interest rates in Ghana and has asked u to borrow in Dollars since USD interest rates are cheaper. You have your own reservations about borrowing in USD due to exchange rate risk and looking for figures to explain to him. You had a chat with with the relationship manager of your bank and they are willing to lend $50m to you for 1 year at an interest rate of 7.5% which appears to be far better than the current 1 year cedi lending rate of 18.01% on the domestic market. Your intention is to borrow in USD And convert this to Ghana cedis. Current exchange rte is 5.20 per USD and is forecasted to be 5.75 per USD in a year's time.

Assume that interest rate parity holds that you intend to hedge the exchange rate risk by entering into a 1 year forward transaction with your bank. what will be the effective annual interest rate in this scenario