Zeda Inc., a U.S. MNC, is considering making a fixed direct investment in Denmark. The Danish government has offered Zeda a concessionary loan of DKK 14,850,000 at a rate of 4 percent per annum. The normal borrowing rate for Zeda is 6 percent in dollars and 5.5 percent in Danish krone. The load schedule calls for the principal to be repaid in three equal annual installments. What is the present value of the benefit of the concessionary loan? The current spot rate is DKK5.60/$1.00 and the expected inflation rate is 3 percent in the United States and 2.5 percent in Denmark. Present value of the benefit of the concessionary loan
Zeda Inc., a U.S. MNC, is considering making a fixed direct investment in Denmark. The Danish government has offered Zeda a concessionary loan of DKK 14,850,000 at a rate of 4 percent per annum. The normal borrowing rate for Zeda is 6 percent in dollars and 5.5 percent in Danish krone. The load schedule calls for the principal to be repaid in three equal annual installments. What is the present value of the benefit of the concessionary loan? The current spot rate is DKK5.60/$1.00 and the expected inflation rate is 3 percent in the United States and 2.5 percent in Denmark. Present value of the benefit of the concessionary loan
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
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Transcribed Image Text:Zeda Inc., a U.S. MNC, is considering making a fixed direct investment in Denmark. The Danish government has offered Zeda a
concessionary loan of DKK 14,850,000 at a rate of 4 percent per annum. The normal borrowing rate for Zeda is 6 percent in dollars
and 5.5 percent in Danish krone. The load schedule calls for the principal to be repaid in three equal annual installments. What is the
present value of the benefit of the concessionary loan? The current spot rate is DKK5.60/$1.00 and the expected inflation rate is 3
percent in the United States and 2.5 percent in Denmark.
Present value of the benefit of the concessionary loan
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