Assume the U

question 23

Multiple Choice

Assume the U.S. one-year interest rate is 9%, while the Chilean one-year interest rate is 13%. If the Chilean peso ____ by ____%, a U.S.-based MNC would incur the same financing cost in dollars versus Chilean pesos over a one year period.

• A) depreciates; 3.54
• B) appreciates; 3.54
• C) depreciates; 3.67
• D) appreciates; 3.67

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Definitions:

Federal Income Tax

The charge imposed by the U.S. government on the yearly income of individuals, businesses, trusts, and other legal bodies.

FICA-OASDI

The Federal Insurance Contributions Act's component for Old-Age, Survivors, and Disability Insurance, a payroll tax that funds Social Security.