The Effective Financing Rate of Financing in a Foreign Currency

question 23

Multiple Choice

The effective financing rate of financing in a foreign currency is directly determined by the ____ over the loan period and the ____ over the loan period.

• A) interest rate of the domestic currency; percentage change in the value of the foreign currency
• B) interest rate of the foreign currency; percentage change in the value of the foreign currency
• C) interest rate of the foreign currency; percentage change in inflation
• D) interest rate of the domestic currency; percentage change in inflation

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Definitions:

Unilateral Mistake

Mistake as to a material fact on the part of only one party to a contract. In this situation, the contract is normally enforceable against the mistaken party, with some exceptions.

Rescission

A remedy in which the contract is canceled and the parties are returned to the positions they occupied before the contract was made.

Contract

A legally binding agreement between two or more parties that outlines duties, obligations, and conditions that are enforceable by law.

Canceling

The act of terminating or revoking an agreement, event, or obligation before it is completed.