Suppose the Value of the Polish Zloty Moves from Z

question 21

Multiple Choice

Suppose the value of the Polish zloty moves from Z 1000 = $1 at the start of the year to Z 1,800 at the end of the year. At the same time, the Polish price level changes from an index of 100 on January 1 to 134 on December 31. U.S. inflation during the year was If the one-year interest rate on the zloty is 44%, what was the real dollar cost of borrowing the zloty during the year?

• A) 17.53%
• B) 27.81%
• C) -23.44%
• D) -8.76%

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