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Consider a U. S.- based MNC that obtains a one-year loan of GBP 40 million at a rate of 4 percent. When the loan is obtained, the GBP is trading at GBPUSD equals 1.60. The MNC expects the GBP to strengthen to GBPUSD equals 1.64 at year- end. The MNC obtains the loan in spite of this forecast because it could offset this GBP liability (short position) against its U. K. operations. Suppose the GBP actually strengthens to 1.62. Calculate the ex post financing cost in USD. Format x.xx%

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Financial Management, Finance

Category:- Financial Management
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