What is the effective cost of this loan for McDougan

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Question - McDougan Associates, a U.S.-based investment partnership, borrows €85,000,000 at a time when the exchange rate is $1.3433/€. The entire principal is to be repaid in three years, and interest is 6.850% per annum, paid annually in euros. The euro is expected to depreciate vis-à-vis the dollar at 3.5% per annum. What is the effective cost of this loan for McDougan?

Reference no: EM132940524

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