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On a particular day, an American company, Company A, borrows euro-denominated funds for one year at 1%. In comparison, a similarly rated U.S. company, Company
On a particular day, an American company, Company A, borrows euro-denominated funds for one year at 1%. In comparison, a similarly rated U.S. company, Company B, borrows a dollar loan with the same maturity at 2.5%. The exchange rate on the borrowing date is $1.1199/. Assume that the international Fisher effect holds true. What is the expected effective cost of debt in dollars (in percentage) for Company A?
Your answer: ______________%
(Keep two decimals; Do include the - if your answer is a loss.)
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