● ● ● Question Chapter 14 Inter-KSA is a Saudi Arabian airline company specializing in internal flights that needs €50,000,000 for one year to finance working capital. The airline firm has two alternatives for borrowing: a. Borrow €50,000,000 in Paris at 7% per annum b. Borrow Saudi Riyals SAR 225,000,000 in Saudi Arabia at 9% per annum and then exchange the riyals at the cross rate of 1 EUR = 4.5 SAR. c. At what ending exchange rate would Inter-KSA be indifferent between borrowing euros and borrowing Saudi riyals?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
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Question Chapter 14
Inter-KSA is a Saudi Arabian airline company specializing in internal flights
that needs €50,000,000 for one year to finance working capital. The airline
firm has two alternatives for borrowing:
a. Borrow €50,000,000 in Paris at 7% per annum
b. Borrow Saudi Riyals SAR 225,000,000 in Saudi Arabia at 9% per annum
and then exchange the riyals at the cross rate of 1 EUR = 4.5 SAR.
c. At what ending exchange rate would Inter-KSA be indifferent between
borrowing euros and borrowing Saudi riyals?
Transcribed Image Text:● ● Question Chapter 14 Inter-KSA is a Saudi Arabian airline company specializing in internal flights that needs €50,000,000 for one year to finance working capital. The airline firm has two alternatives for borrowing: a. Borrow €50,000,000 in Paris at 7% per annum b. Borrow Saudi Riyals SAR 225,000,000 in Saudi Arabia at 9% per annum and then exchange the riyals at the cross rate of 1 EUR = 4.5 SAR. c. At what ending exchange rate would Inter-KSA be indifferent between borrowing euros and borrowing Saudi riyals?
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