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Result in an effective financing rate

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Reference no: EM132202895

If interest rate parity does not hold and the forward premium exceeds the interest rate differential, foreign financing with a simultaneous forward purchase of the currency borrowed will result in an effective financing rate that is:

  • higher than the domestic interest rate.
  • ?highly variable.
  • none of the options listed
  • similar to the domestic interest rate.
  • lower than the domestic interest rate.

Reference no: EM132202895

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