Assume UK one-year money market rate is 8%. A Ghanaian firm is planning to borrow British pounds, convert them into cedis and repay the loan in one year. Available information is that the cedi currency will depreciate by 21% against the pound sterling  by the time of payment of the loan. Determine the effective financing cost of borrowing the British pounds. Will you finance with a local loan costing 28% per annum or the pound sterling loan?

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