Lower interest costs by borrowing offshore on covered basis

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Reference no: EM131512027

An Australian firm needs to borrow 1 million AUD for 1 year. The interest rate in Australia is 7.5 percent and the interest rate in the US is 4 percent and the spot exchange rate is AUD/USD= 0.7400. Can the Australian firm achieve lower interest costs by borrowing offshore on a covered basis?

Reference no: EM131512027

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