loan is denominated in Mexican pesos, carries a 10 percent nominal rate, and requires equal semiannual
payments. The exchange rate at the time of the loan was 5.75 pesos per dollar but immediately dropped
to 5.10 (pesos per dollars) before the first payment came due. The loan carried no exchange rate
protection and was not hedged by Hindustan Construction Corporation in the foreign exchange market.
Thus, Hindustan Construction Corporation must convert U.S. funds to Mexican pesos to make its
payments. If the exchange rate remains at 5.10 pesos per dollar through the end of the loan period, what
effective interest rate will Hindustan Construction Corporation end up paying on the foreign loan?
This question was asked on Jan 29, 2013.
Recently Asked Questions
- Use semaphores to “implement” the following precedence/dependence graph
- Two funds, X and Y start with the same amount. Given the information below, calculate i. i) Fund X accumulates at a force of interest of 14 % . ii) Fund Y
- WCP24 Waterways Corporation is continuing its budget preparations. Waterways had the following static budget and overhead costs for March 2014. WATERWAYS