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Assume that the U.S. borrowing rate is 8% while the German is 10%. If Euros are borrowed by a U.S. firm for one year, they would have to _____ against the dollar by_____ to have the same effective financing
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Assume that the U.S. borrowing rate is 8% while the German is 10%. If Euros are borrowed by a U.S. firm for one year, they would have to _____ against the dollar by_____ to have the same effective financing rate as borrowing dollars. Group of answer choices Appreciate, 1.1818%. Appreciate, 1.8518%. Depreciate, 1.6363%. Depreciate, 1.8518%. Depreciate, 1.1818%.

User Moth
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17 votes

Answer:

Depreciate 1.1818

Step-by-step explanation:

U.S. has a borrowing rate of 8% and German has borrowing rate of 10%. If U.S. dollars are borrowed from firm then Euros will depreciate to match with the dollar borrowing.

[1 + 8% ] / [ 1 + 10%] - 1 = - 1.1818

User LIJIN SAMUEL
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