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Suppose that on January 1, the cost of borrowing Australian dollars (AUD) for the year is 18%. During the year, U.S. inflation is 5%, and
Suppose that on January 1, the cost of borrowing Australian dollars (AUD) for the year is 18%. During the year, U.S. inflation is 5%, and Australian inflation is 9%. At the same time, the exchange rate changes from AUD 1 = USD 0.15 on January 1 to AUD 1 = USD 0.10 on December 31. What was the nominal U.S. dollar cost of borrowing AUD for the year
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