Assume That the U

question 20

Multiple Choice

Assume that the U.S.interest rate is 11% while the interest rate on euro is 7%.  If euros are borrowed by a U.S.firm,they would have to _________ against the dollar by __________ in order to have the same effective financing rate from borrowing dollars.

• A) depreciate;about 3.74%
• B) appreciate;about 3.74%
• C) appreciate;about 4.53%
• D) depreciate;about 4.53%

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Definitions:

Maturity

Maturity indicates the date on which the principal amount of a financial instrument is due to be paid back.

Buyback Price

Buyback price is the price at which a company agrees to repurchase its own shares from shareholders, often as part of a share repurchase program.

Quality Ratings

Assessments of the creditworthiness or quality of corporations and government bonds, often provided by credit rating agencies.

Required Rates

The minimum returns demanded by investors or lenders to compensate for the risk of an investment or loan.