A Firm Forecasts the Euro's Value as Follows for the Next

A firm forecasts the euro's value as follows for the next year:
$\begin{array}{l}\text { Possible }\\\begin{array} { c c } \text { Percentge Change } & \text { Prabability } \\\hline - 2 \% & 10 \% \\3 \% & 50 \% \\6 \% & 40 \%\end{array}\end{array}$
The annual interest rate on the euro is 7%. The expected value of the effective financing rate from a U.S. firm's perspective is about:

A) 8.436%.
B) 10.959%.
C) 11.112%.
D) 11.541%.

Correct Answer:

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