Determine the expected effective financing rate

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The spot rate of the Australian dollar is $.62. The 1-year forward rate of the Australian dollar is $.60. The Australian 1-year interest rate is 9 percent. Assume that the forward rate is used to forecast the future spot rate. Determine the expected effective financing rate for a U.S. firm that borrows Australian dollars to finance its U.S. business.

Reference no: EM131042626

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