10 effective financing rate boca inc needs 4 mil lion for one year it currently has 1319260

10.   Effective Financing Rate. Boca, Inc., needs $4 mil- lion for one year. It currently has no business in Japan but plans to borrow Japanese yen from a Japanese bank because the Japanese interest rate is three percentage points lower than the U.S. rate. Assume that interest rate parity exists; also assume that Boca believes that the one-year forward rate of the Japanese yen will exceed the future spot rate one year from now. Will the expected effective fi- nancing rate be higher, lower, or the same as fi- nancing with dollars? Explain.

 

 

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