Swenser Corporation arranged a two-year, $1,000,000 loan to fund a foreign project. The loan is denominated in Mexican pesos, carries a 10 percent nominal rate, and requires equal semiannual payments. The exchange rate at the time of the loan was 5.75 pesos per dollar but immediately dropped to 5.10 (pesos per dollars) before the first payment came due. The loan carried no exchange rate protection and was not hedged by Swenser in the foreign exchange market. Thus, Swenser must convert U.S. funds to Mexican pesos to make its payments. If the exchange rate remains at 5.10 pesos per dollar through the end of the loan period, what effective interest rate will Swenser end up paying on the foreign loan?
A) 10.36%
B) 17.44%
C) 21.79%
D) 11.50%
E) 20.00%

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The Answer of Swenser Corporation arranged a two-year, $1,000,000 loan to fund a foreign project. The loan is denominated in Mexican pesos, carries a 10 percent nominal rate, and requires equal semiannual payments. The exchange rate at the time of the loan was 5.75 pesos per dollar but immediately dropped to 5.10 (pesos per dollars) before the first payment came due. The loan carried no exchange rate protection and was not hedged by Swenser in the foreign exchange market. Thus, Swenser must convert U.S. funds to Mexican pesos to make its payments. If the exchange rate remains at 5.10 pesos per dollar through the end of the loan period, what effective interest rate will Swenser end up paying on the foreign loan?
A) 10.36%
B) 17.44%
C) 21.79%
D) 11.50%
E) 20.00%

Swenser Corporation Arranged a Two-Year, $1,000,000 Loan to Fund a Foreign