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    Exchange rates

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    Intel has the choice of borrowing dollars at 9.5% or yen at 7% for one year. The current exchange rate is ?152=$1. At what end of year exchange rate would the yen costs of these two loans be equal?

    The balance of each loan is compared after one year. Setting these balances equal to each other gives you a ratio which is the desired exchange rate.

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    Solution Preview

    For my example suppose we borrow $1000 at 9.5% costing us $95 at year's end.
    The same ...

    Solution Summary

    Money is borrowed in dollars and in yens at different rates. At what exchange rate will these investments be equal?