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Suppose That a Firm Located in Russia Can Borrow Euros

Question 2

Multiple Choice

Suppose that a firm located in Russia can borrow euros at 8% or rubbles at 14%. Which of the following is correct? If the rubble is expected to depreciate from R58 = €1 at the beginning of the year to R61 = €1 at the end of the year, then the expected euro cost of the Russian rubble loan is


A) 8.39%
B) 20.14%
C) 12.37%
D) 9.15%

Correct Answer:

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