# Effective Financing Rate of Canadian Dollar and Swiss Franc

Not what you're looking for?

Hi, I need some help with these two questions:

1. The annual interest rate on the Canadian dollar is 9%. The forecast of the Canadian dollar's value for the next year is shown below. Calculate the effective financing rate for a U.S. company. Show how you derive the answer.

Percentage Change Probability

1.0% 15%

-1.5% 30%

-2.0% 55%

2.The annual interest rate on the Swiss franc is 4%. It is expected to appreciate 3% over the next year. Calculate the effective financing rate for a U.S. company. Show how you derive the answer.

##### Purchase this Solution

##### Solution Summary

This in-depth solution calculates the effective interest rate on borrowing in a foreign currency with step-by-step workings and all calculations shown in excel file attached.

##### Solution Preview

Please see the attached file:

1. The annual interest rate on the Canadian dollar is 9%. The forecast of the Canadian dollar's value for the next year is shown below. Calculate the effective financing rate for a U.S. company. Show how you derive the answer.

Percentage Change Probability Percentage Change x Probability

1.00% 15% 0.1500% =1.% x 15.%

-1.50% 30% -0.4500% =-1.5% x 30.%

-2.00% 55% -1.1000% =-2.% x 55.%

100% -1.4000%

Therefore the estimated change in Canadian dollar = -1.4000%

(1+Effective interest rate) =(1+ Canadian dollar interest rate) x (1+ change in spot rate of Canadian dollar)

or Effective interest rate ={(1+ Canadian dollar interest rate) x (1+ change in spot rate of Canadian ...

##### Purchase this Solution

##### Free BrainMass Quizzes

##### Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

##### MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

##### Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

##### Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

##### Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.