DR. CARLOS MNDEZ-DAVID
FINA 4020 FINANZAS
INTERNACIONALES
Financial Globalization
(Chapter 21)
Book: Krugman, Obstfeld &
Melitz, (2012)
Offshore Banking
The term offshore banking is used to
describe the business that banks foreign
offices conduct outside
P8-1.
Rate of return: rt =
(Pt Pt 1 Ct )
Pt1
LG 1; Basic
a.
Investment X: Return
($21,000 $20,000 $1,500)
12.50%
$20,000
($55,000 $55,000 $6,800)
12.36%
$55,000
b. Investment X should be selected because it has a higher rate of return for the same leve
P9-6.
After-tax cost of debt
a. The after-tax cost of borrowing from the motorcycle dealer is the same as the pretax cost,
5%.
b. The after-tax cost of taking out the second mortgage is 6% (1 25%) = 4.5%.
c. The mortgage loan would cost less after taxes c
