On January 1, the cost of borrowing Hong Kong dollars (HKD) for one year was 18 percent.
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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?
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...
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Borrow HKD100 000 Pay back at the end of the year HKD...View the full answer
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Related Book For
Contemporary Financial Management
ISBN: 9780324289114
10th Edition
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow
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