Both loans require repayment of principal and interest

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The firm can borrow in U.S. at 10% compounded annually or the firm can borrow in Euros from a German bank, the spot rate is $ 1.10 per Euro and the one-year forward rate is $ 1.20 per Euro. Both loans require repayment of the principal and interest at year-end. What is the German interest rate that makes you indifferent between borrowing in Germany or the U.S.?

Reference no: EM131180400

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