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5. Assume the U.S. interest rate is 7.5 percent, the New Zealand interest rate is 6.5 percent, the spot rate of the NZS is $.
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Answer #1

Percentage change in New Zealand$ = ($0.48-$0.52)/0.52*100 = -7.69% = -7.7%

Effective financing rate = (1+6.5%)(1+(-7.7%))-1 = -1.7%

EFFECTIVE FINANCING RATE =     -1.7%

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