Assume that interest rates of most industrialized countries are similar to the U.S. interest rate. In the last few months, the currencies of all industrialized countries weakened substantially against the U.S. dollar. If non-U.S. firms based in these foreign countries financed with U.S. dollars during this period (even when they had no receivables in dollars), their effective financing rate would have been:

Question

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If the currencies of all industrialized countries weakened substantially against the U.S. dollar, then firms based in these foreign countries financing with U.S. dollars would have benefited from a lower effective financing rate. This means that their effective financing rate would have been lower than the interest rate of their respective countries. Therefore, the answer is D, higher than the interest rate of their respective countries.

Assume That Interest Rates of Most Industrialized Countries Are Similar