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Consider the situation of firm A and firm B. The current exchange rate is $1.50/. Firm A is a U.S. MNC and wants to borrow
Consider the situation of firm A and firm B. The current exchange rate is $1.50/. Firm A is a U.S. MNC and wants to borrow 40 million for 2 years. Firm B is a French MNC and wants to borrow $60 million for 2 years. Their borrowing opportunities are as shown; both firms have AAA credit ratings. A $ $7% $8% 6% 5% B Explain how firm B could use the forward exchange markets to redenominate a 2-year 40m 5 percent euro loan into a 2-year USD-denominated loan
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