Question

Assume the U.S. one-year interest rate is 9%, while the Chilean one-year interest rate is 13%. If the Chilean peso ____ by ____ percent, a U.S.-based MNC would incur the same financing cost in dollars as in Chilean pesos over a one-year period.A. depreciates, 3.54B. appreciates, 3.54C. depreciates, 3.67D. appreciates, 3.67

Answer 1

A: depreciates, 3.54

Step-by-step explanation:

By depreciating Chilean Peso by 3.54%, a U.S.-based MNC would incur the same financing cost in dollars as in Chilean pesos over a one-year period having interest rate of 9%