International Finance: Effective financing rate
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Assume the U.S. interest rate is 7.5%, the New Zealand interest rate is 6.5%, the spot rate of the NZ$ is $.52, and the one?year forward rate of the NZ$ is $.52. At the end of the year, the spot rate is $.48. Based on this information, what is the effective financing rate for a U.S. firm that takes out a one year, uncovered NZ$ loan?
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Solution Summary
The Effective financing rate is calculated for a U.S. firm that takes out a one year, uncovered NZ$ loan, given the U .S. interest rate , the New Zealand interest rate, the spot rate of the NZ$ and the one year forward rate of the NZ$.
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Assume the U.S. interest rate is 7.5%, the New Zealand interest rate is 6.5%, the spot rate of the NZ$ is $.52, and the one?year forward rate of the NZ$ is $.52. At the end of the year, the spot rate is $.48. Based on this information, what is the effective financing rate for a U.S. firm that takes out a one?year, uncovered NZ$ ...
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