### Makes short term borrowings denominated

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A U.S. based firm makes a short term borrowings denominated in £ from a bank in U.K.

The quoted interest rate on this loan is 5.75%. If the spot exchange rate of U.S.\$ at the time of taking loan was £0.82 and at the time of expiration was £0.79, compute the effective financing cost.

9.36%

1.88%

3.80%

9.77%

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