Assume That the U

question 51

Multiple Choice

Assume that the U.S. interest rate is 11% while the interest rate on the euro is 7%. If euros are borrowed by a U.S. firm, they would have to ____ against the dollar by ____ in order to have the same effective financing rate from borrowing dollars.

• A) depreciate; about 3.74%
• B) appreciate; about 3.74%
• C) appreciate; about 4.53%
• D) depreciate; about 4.53%

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Definitions:

Carcinogen

is any substance, radionuclide, or radiation that promotes carcinogenesis, the formation of cancer, by altering cellular metabolism or damaging DNA directly in cells.

Stock Split

A corporate action that increases the number of a company's shares by issuing more shares to current shareholders, thus reducing the price per share.

Common Stock Dividend

A portion of a company's earnings distributed to shareholders of its common stock, typically in the form of cash or additional shares.

Common Shares Outstanding

The total number of shares of a company that are owned by shareholders, excluding shares owned by the company itself.