Lucy’s is a US-based restaurant chain that is expanding to Taiwan. Lucy can either borrow from a Taiwan-based bank at 9.75% (in TWD) or from a US bank at 6.25%. The spot rate is USD 0.1558 = TWD 1. Economists estimate for inflation in the US is 1.5% and 5.2% in Taiwan. If Lucy’s wants the lowest cost loan for their US-based shareholders, which loan should Lucy’s take?

Answer rating: 100% (QA)

Lucys should take the loan from the US bank The formula for re... View the full answer