GM (a US MNC) borrows MXN 2 million for two years at an interest rate of 7.64% per annum. The current exchange rate is MXN31.32/USD. Alternatively, the subsidiary could have borrowed the USD-equivalent of MXN 2 million in the US at 6.92% per annum. What is the ex-post cost of the loan at maturity? Assume the marginal tax rate that GM pays is 15.50%. a 7894%
GM (a US MNC) borrows MXN 2 million for two years at an interest rate of 7.64% per annum. The current exchange rate is MXN31.32/USD. Alternatively, the subsidiary could have borrowed the USD-equivalent of MXN 2 million in the US at 6.92% per annum. What is the ex-post cost of the loan at maturity? Assume the marginal tax rate that GM pays is 15.50%. a 7894%
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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GM (a US MNC) borrows MXN 2 million for two years at an interest rate
of 7.64% per annum. The current exchange rate is MXN31.32/USD.
Alternatively, the subsidiary could have borrowed the USD-equivalent of
MXN 2 million in the US at 6.92% per annum. What is the ex-post cost
of the loan at maturity? Assume the marginal tax rate that GM pays is
15.50%.
O a. 7.894%
b. 5.193%
c. 6.343%
O d. 8.669%
e. 11.164%
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