Imagine a multinational corporation, Omega Industries, considering borrowing in the United States or the Eurozone to finance
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Question:
Imagine a multinational corporation, Omega Industries, considering borrowing in the United States or the Eurozone to finance a project. Omega plans to borrow for one year. The current spot exchange rate is Euro EUR US dollars USD The oneyear interest rate in the United States is and in the Eurozone, it is
Calculate and interpret the expected forward exchange rate using the interest rate parity formula
Determine and interpret the cost of borrowing in the Eurozone using the forward contract and compare it to the cost of borrowing in the United States.
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