Watax inc a mining outfit in phoenix intends to engage in mining operations in southern Africa after conducting comprehensive feasibility of the referenced country.

Assume that the prevailing interest rate in South Africa is 9 percent. To meet its working capital needs, watax will borrow south African rands, convert them to us dollars, and repay the loan in one year? What will watax effective financing rate if the rand depreciates by 6 perfect or appreciates by 3 percent. 

Discuss your result:

Given the information and assuming a 50 % probability that either scenario would occur, determinate the expected value of the effective financing rate?

Assume that the one tear prevailing interest in mexico is 5 percent while that in the US is 8%? 

What percentage change in the peso would cause a US firm borrowing peso to incur the same effective financing rate as it would it borrowed dollars? Discuss the result?

Answer rating: 100% (QA)

To calculate Wataxs effective financing rate we need to take into account the interest rate on the l... View the full answer