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 countries financed with U.S. dollars during this period (even when they had no receivables in dollars), their effective financing rate would have been:

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The effective financing rate would be higher because the depreciation of their local currencies against the U.S. dollar would increase the cost of repaying the dollar-denominated debt.

Assume That Interest Rates of Most Industrialized Countries Are Similar