You have a line of credit for 1000000 at 4 for six months, Ask an Expert

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You have a line of credit for $1,000,000 at 4% for six months from Bank of America. You need to borrow 10,000,000 Mexican Pesos for six months. The spot FX rate is 13 P/$ and the 6-month forward rate is 13.25 P/$. All interest rates are quoted on an annual basis.

a. What is the implied Peso borrowing rate when you convert a US$ loan into a loan on Mexican Pesos?

b. What transactions would you need to execute in order to convert a US$ loan into a 6-month loan on 10,000,000 Mexican Pesos?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91269817

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