Chapter21: International Cash Management
Section: Chapter Questions
Problem 4ST
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Question
- Assume UK one-year
money market interest rate is 8%. A Ghanaian firm is planning to borrow British pounds, convert them into cedi and repay the loan at the end of one year. Available information is that the cedi currency willdepreciate by 21% against the pound sterling by the time of payment of the loan. Determine the effective financing cost of borrowing the British pound. Will you finance with a local loan costing 28% per annum or the pound sterling loan?
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