Assume a U

question 3

Multiple Choice

Assume a U.S.-based MNC is borrowing Romanian leu (ROL) at an interest rate of 8% for one year.Also assume that the spot rate of the leu is $.00012 and the one-year forward rate of the leu is $.00010.The expected spot rate of the leu one-year from now is $.00011.What is the effective financing rate for the MNC assuming it borrows leu on a covered basis

• A) 10%.
• B) -10%.
• C) -1%.
• D) 1%.
• E) none of the above

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Definitions:

Auricles

The external part of the ear, also known as the pinna, which is visible on the sides of the head.

Chordae Tendineae

Tendinous cords that connect the papillary muscles to the atrioventricular valves in the heart to prevent inversion during contraction.

Trabeculae Carnea

A series of muscular ridges found inside the ventricles of the heart, contributing to the heart's contractile force.