Assume the U

question 20

Multiple Choice

Assume the U.S. one-year interest rate is 8%, and the British one-year interest rate is 6%. The one-year forward rate of the pound is $1.97. The spot rate of the pound at the beginning of the year is $1.95. By the end of the year, the pound's spot rate is $2.05. Based on the information, what is the effective financing rate for a U.S. firm that takes out a one-year, uncovered British loan?

• A)about 12.4%.
• B)about 7.1%.
• C)about 13.5%.
• D)about 10.3%.
• E)about 11.3%.

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Definitions:

Fewer Meetings

The practice or objective of reducing the number of formal gatherings or assemblies, often to increase efficiency or productivity.

Role Ambiguities

Situations where the responsibilities, expectations, or objectives of a job are unclear or poorly defined.

Task Uncertainties

Situations where the outcomes or processes of a task are unpredictable, often requiring adaptive strategies and flexibility in management.

Cross-purposes

A situation where different parties or elements have conflicting goals or objectives, leading to misunderstandings or ineffective results.