Consider the Situation of Firm a and Firm B $$\begin{array} { l l l } & \$ & £ \\\text { A } & \$ 6 \% & £5 \% \\B & \$7 \% & £ 4\%\end{array}$$

question 9

Essay

Consider the situation of firm A and firm B.The current exchange rate is $2.00/£ Firm A is a U.S.MNC and wants to borrow £30 million for 2 years.Firm B is a British MNC and wants to borrow $60 million for 2 years.Their borrowing opportunities are as shown,both firms have AAA credit ratings.
$$\begin{array} { l l l } & \$ & £ \\\text { A } & \$ 6 \% & £5 \% \\B & \$7 \% & £ 4\%\end{array}$$ If firm A could use the forward exchange markets to redenominate a 2-year $60m 6 percent USD loan into a 2-year pound denominated loan,what would be the interest rate?

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Definitions:

Job Market

The market in which employers search for employees and employees search for jobs; it reflects the demand and supply of labor.

Initiative

The ability to assess and initiate things independently, often seen as a valuable trait in personal and professional contexts.

Common Areas

Shared spaces within a building or community, such as lobbies, hallways, and recreational facilities.

Concerns

Issues or matters that cause worry or distress, requiring attention or resolution.