​Assume Jelly Corporation, a U

question 28

Multiple Choice

​Assume Jelly Corporation, a U.S.-based MNC, obtains a one-year loan of 1,500,000 Malaysian ringgit (MYR) at a nominal interest rate of 7 percent. At the time the loan is extended, the spot rate of the ringgit is $.25. If the spot rate of the ringgit in one year is $.28, the dollar amount initially obtained from the loan is $____, and the MNC needs $____ to repay the loan.

• A) ​375,000; 449,400
• B) ​449,400; 375,000
• C) ​6,000,000; 5,357,143
• D) ​5,357,143; 6,000,000

---

Definitions:

Risk Premium

The extra return above the risk-free rate that investors demand as compensation for the risk of an investment.

Systematic Risk

The risk inherent to the entire market or market segment, unavoidable through diversification.

Security Market Line

A line that represents the relationship between the risk of an investment and its expected return, based on the capital asset pricing model (CAPM).

Risk-Free Rate

The theoretical rate of return on an investment with no risk of financial loss, often represented by government bonds.