Multiple Choice
Assume a U.S.-based MNC is borrowing Romanian leu (ROL) at an interest rate of 8% for one year.Also assume that the spot rate of the leu is $.00012 and the one-year forward rate of the leu is $.00010.The expected spot rate of the leu one-year from now is $.00011.What is the effective financing rate for the MNC assuming it borrows leu on a covered basis
A) 10%.
B) -10%.
C) -1%.
D) 1%.
E) none of the above
Correct Answer:
Verified
Correct Answer:
Verified
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