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McDougan Associates, a U.S.-based investment partnership, borrows 80,000,000 at a time when the exchange rate is $1.3460/. The entire principal is to be repaid in

McDougan Associates, a U.S.-based investment partnership, borrows 80,000,000 at a time when the exchange rate is $1.3460/. The entire principal is to be repaid in three years, and interest is 6.250% per annum, paid annually in euros.

If the euro is expected to appreciate vis vis the dollar at 2% per annum. What is the effective cost of this loan for McDougan?

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