# Question

1. Gizmo, U.S.A. is investigating mediumterm financing of $10 million in order to build an addition to its factory in Toledo, Ohio. Gizmo's bank has suggested the following alternatives:

Type of loan Rate

3-year U.S. dollar loan ..... 14

3-year Euro loan ......... 8

3-year Swiss franc loan ..... 4

a. What information does Gizmo require to decide among the three alternatives?

b. Suppose the factory will be built in Geneva, Switzerland, rather than Toledo. How does this affect your answer in part a?

Type of loan Rate

3-year U.S. dollar loan ..... 14

3-year Euro loan ......... 8

3-year Swiss franc loan ..... 4

a. What information does Gizmo require to decide among the three alternatives?

b. Suppose the factory will be built in Geneva, Switzerland, rather than Toledo. How does this affect your answer in part a?

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