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Suppose that we can see that the interest rate in Sweden is 3.2% and the U.S. interest rate is 5.0 percent. We also observe that

Suppose that we can see that the interest rate in Sweden is 3.2% and the U.S. interest rate is 5.0 percent. We also observe that the Swedish kronas forward rate has a premium of 2.1 percent. If a U.S. firm is solely interested in minimizing the cost of financing for a project in Sweden, should the firm finance in U.S. dollars or Swedish krona? Explain your response.

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