A US Firm Plans to Borrow Swiss Francs Today for a a One-Year

question 31

Multiple Choice

A U.S. firm plans to borrow Swiss francs today for a one-year period. The Swiss interest rate is 9%. It uses today's spot rate as a forecast for the franc's spot rate in one year. The U.S. one-year interest rate is 10%. The expected effective financing rate on Swiss francs is:

• A) equal to the U.S. interest rate.
• B) less than the U.S. interest rate, but more than the Swiss interest rate.
• C) equal to the Swiss interest rate.
• D) less than the Swiss interest rate.
• E) more than the U.S. interest rate.

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