FINANCE-Duck Inc, a company based in Oracabessa borrowed USD 50 Milion

QUESTION

Duck Inc, a company based in Oracabessa borrowed USD 50 Milion. from a syndicate of banks at rate of 6% p.a. for one year. At the time of the loan, the spot exchange rate of the Oracabessa Kwat (ORK) WAS 4.50, (european terms). At the maturity of the loan, interest for the full year and principal were repaid. At that date, the exchange rate of the kwat was 5.10 (european terms). A) what were the kwat proceeds of the loan? B) What was the kwat repayment amount (principal and interest) at maturity? C) What was the effective interest rate of the loan, in kwats (treat any payment over and above the amount borrowed as interest)?

ANSWER:

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