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Your company is developing a project for which it will need to obtain a one-year $100k loan in one year. The bank has just offered
Your company is developing a project for which it will need to obtain a one-year $100k loan in one year. The bank has just offered to extend you such a loan and you will be required to pay an 11,5% interest rate on it. You are also provided with the following information about the current market: Current spot rates for 1 and 2 years are 7% and 9% respectively. [Suppose Forward contracts are not traded in the market] Will you accept the banks offer? Why? Explain your financing strategy
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