A Ghanaian multinational firm has two options in sourcing funds. The first option is to raise cedi on the local financial market at 25% per annum. The second option is to borrow dollars from a US bank at 6% per annum, convert it into cedi and pay the loan in one year. Assuming that the dollar assuming the dollar appreciates by 15% against the cedi by the end of the year when the loan is due, calculate which of the two options is cheaper.
A Ghanaian multinational firm has two options in sourcing funds. The first option is to raise cedi on the local financial market at 25% per annum. The second option is to borrow dollars from a US bank at 6% per annum, convert it into cedi and pay the loan in one year. Assuming that the dollar assuming the dollar appreciates by 15% against the cedi by the end of the year when the loan is due, calculate which of the two options is cheaper.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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- A Ghanaian multinational firm has two options in sourcing funds. The first option is to raise cedi on the local financial market at 25% per annum. The second option is to borrow dollars from a US bank at 6% per annum, convert it into cedi and pay the loan in one year. Assuming that the dollar assuming the dollar appreciates by 15% against the cedi by the end of the year when the loan is due, calculate which of the two options is cheaper.
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