Assume that the UK interest rate is 11 per cent while the interest rate on euro is 7 per cent. If euros are borrowed by a UK firm, they would have to ____ against the pound by ____ in order to have the same effective financing rate from borrowing pounds.
A) depreciate; about 3.74%
B) appreciate; about 3.74%
C) appreciate; about 4.53%
D) depreciate; about 4.53%

Question

Quizplus · Accepted Answer

The Answer of Assume that the UK interest rate is 11 per cent while the interest rate on euro is 7 per cent. If euros are borrowed by a UK firm, they would have to ____ against the pound by ____ in order to have the same effective financing rate from borrowing pounds.
A) depreciate; about 3.74%
B) appreciate; about 3.74%
C) appreciate; about 4.53%
D) depreciate; about 4.53%

Assume That the UK Interest Rate Is 11 Per Cent