Assume the UK One-Year Interest Rate Is 8 Per Cent

question 19

Multiple Choice

Assume the UK one-year interest rate is 8 per cent, and the euro one-year interest rate is 6 per cent. The one-year forward rate of the euro is £0.67. The spot rate of the euro at the beginning of the year is £0.65. By the end of the year, the euro's spot rate is £0.68. Based on the information, what is the effective financing rate for a UK firm that takes out a one-year, uncovered euro loan?

• A) About 12.4%
• B) About 7.1%
• C) About 13.5%
• D) About 10.9%
• E) About 11.3%

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Average Household Income

The mean level of income earned by the members of a household in a given period, used as a socioeconomic indicator.

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