Solution-What is the effective borrowing costs

What is the effective borrowing costs

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An Australian company observes they can borrow in the US at 4% p.a. whereas to borrow locally would cost 6% p.a. They decide to borrow US $10 million for one year when the AUD/ Usd rate is 0.76 and to hedge the FX risk with an FX Swap.

a) How much USD is repayable in 1 year?

b) What rated will make up FX swap (assuming FX dealer used above data to compute their forward rate)?

c) How much AUD will be required to repay the debt?

d) What is the effective borrowing costs?

Reference no: EM132804626

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What is the effective borrowing costs

Reference no: EM132804626

Reference no: EM132804626

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