Assume the U

question 49

Multiple Choice

Assume the U.S. interest rate is 7.5%, the New Zealand interest rate is 6.5%, the spot rate of the NZ$ is $.52, and the one-year forward rate of the NZ$ is $.50. At the end of the year, the spot rate is $.48. Based on this information, what is the effective financing rate for a U.S. firm that takes out a one-year, uncovered NZ$ loan?

• A)about -1.7%.
• B)about 0.0%.
• C)about 14.7%.
• D)about 15.4%.
• E)about 8.3%.

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