What was the real cost of borrowing hkd for one year

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Reference no: EM131334797

On January 1, the cost of borrowing Hong Kong dollars (HKD) for one year was 18 percent. During the year the U.S. inflation rate was 2 percent and the Chinese inflation rate was 9 percent. The exchange rate on January 1 was HKD7/$.

On December 31, the exchange rate was HKD8/$.

If you borrowed HKD100,000 on January 1, converted this to dollars and used these funds for one year, and then paid off the HKD loan on December 31, what was the real cost of borrowing HKD for one year?

Reference no: EM131334797

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