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Assume that interest rate parity exists. If the forward rate is an unbiased forecast of the...

Assume that interest rate parity exists. If the forward rate is an unbiased forecast of the future spot rate , explain the implications from borrowing a foreign currency (versus local financing) over time.

Solutions

Expert Solution

Hence, there will be no implication from borrowing a foreign currency. The cost of borrowing foreign currency will be same as the cost of home currency.

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jeff jeffy answered 2 years ago
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