Blenman Corporation,based in Canada,arranged a 2-year,$1,000 loan to fund a project in Mexico.The loan is denominated in Mexican pesos,carries a 10.0% nominal rate,and requires equal semiannual payments.The exchange rate at the time of the loan was 10.1366 pesos per dollar,but it dropped to 9.5511 pesos per dollar before the first payment came due.The loan was not hedged in the foreign exchange market.Thus,Blenman must convert Canadian dollars into Mexican pesos to make its payments.If the exchange rate remains at 9.5511 pesos per dollar through the end of the loan period,what effective interest rate will Blenman end up paying on the loan?

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The Answer of Blenman Corporation,based in Canada,arranged a 2-year,$1,000 loan to fund a project in Mexico.The loan is denominated in Mexican pesos,carries a 10.0% nominal rate,and requires equal semiannual payments.The exchange rate at the time of the loan was 10.1366 pesos per dollar,but it dropped to 9.5511 pesos per dollar before the first payment came due.The loan was not hedged in the foreign exchange market.Thus,Blenman must convert Canadian dollars into Mexican pesos to make its payments.If the exchange rate remains at 9.5511 pesos per dollar through the end of the loan period,what effective interest rate will Blenman end up paying on the loan?

Blenman Corporation,based in Canada,arranged a 2-Year,$1,000 Loan to Fund a Project