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Expected value of the effective financing rate

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A firm forecasts the euro's value as follows for the next year:

                                                Possible

                                        Percentage Change                                   Probability

                                                 -0.01                                                        10%

                                                   0.01                                                        50%

                                                   0.04                                                       40%

The annual interest rate on euro is 7%. The expected value of the effective financing rate from a U.S. firm's perspective is about:

Answer= 0.09

 

Reference no: EM132087029

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