Question: Assume that the U.S. interest rate is 7% while the interest rate on the British pound is 3%. If a U.S. firm borrows pounds, the

Assume that the U.S. interest rate is 7% while the interest rate on the British pound is

3%. If a U.S. firm borrows pounds, the pound would have to ____ against the dollar by

____ in order to have the same effective financing rate as borrowing dollars.

none of the options listed

appreciate; about 3.74%

appreciate; about 3.88%

depreciate; about 3.88%

depreciate; about 3.74%

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