QUESTION 13

1. Maston Corporation has forecasted the value of the Russian ruble as follows for the next year:

   Percentage Change	Probability of Occurrence
   5%	20%
   3%	50%
   1%	30%

   If the Russian interest rate is 30 percent, the expected cost of financing a one-year loan in rubles is:

   	a.	27.14 percent
   	b.	None of these are correct.
   	c.	26.10 percent
   	d.	32.86 percent

1.5 points

QUESTION 14

1. Kushter Inc. would like to finance in euros. European interest rates are currently 4 percent, and the euro is expected to depreciate by 2 percent over the next year. What is Kushter's effective financing rate next year?

   	a.	1.92 percent
   	b.	None of these are correct
   	c.	2.00 percent
   	d.	6.08 percent

2 points

QUESTION 15

1. If interest rate parity exists, and the forward rate is an accurate estimator of the future spot rate, the foreign financing rate will be ____ the home financing rate.

   	a.	similar to
   	b.	None of these are correct.
   	c.	greater than
   	d.	lower than