Suppose that on January 1, the cost of borrowing French francs for the year is 18 During the year, U S inflation is 5 , and French inflation is 9 At the same time, the exchange rate changes from FF 1 $0 15 on January 1 to FF 1 $0 10 on December 31 What was the real U S dollar cost of borrowing fran...

During the year the franc devalued by 15 1015 3333 T ...

Suppose that on January 1, the cost of borrowing French francs for the year is 18%. During

Question:

Suppose that on January 1, the cost of borrowing French francs for the year is 18%. During the year, U.S. inflation is 5%, and French inflation is 9%. At the same time, the changes from FF 1 = $0.15 on January 1 to FF 1 = $0.10 on December 31. What was the real U.S. dollar cost of borrowing francs for the year?

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...