one issued $200 million worth of one-year CD liabilities in Brazilian reals at a rate of 6.50 percent. The exchange rate of U.S. dollars for Brazilian reals at the time of the transaction was $0.305/Br 1. What will be the percentage cost to Bank one on this CD if the dollar appreciates relative to the Brazilian real such that the exchange rate of U.S. dollars for Brazilian reals is $0.285/Br 1 at the end of the year?

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
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Bank one issued $200 million worth of one-year CD liabilities in Brazilian reals at a rate of 6.50 percent. The exchange rate of U.S. dollars for Brazilian reals at the time of the transaction was $0.305/Br 1.

 What will be the percentage cost to Bank one on this CD if the dollar appreciates relative to the Brazilian real such that the exchange rate of U.S. dollars for Brazilian reals is $0.285/Br 1 at the end of the year?

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