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Suppose that Russell Co. is a U.S.-based MNC that is deciding whether to finance its...

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Finance

image Suppose that Russell Co. is a U.S.-based MNC that is deciding whether to finance its operations (with a one-year loan) in U.S. dollars or Canadian dollars. The rate on a one-year loan in U.S. dollars is 8.00%, while the rate on a one-year loan in Canadian dollars is 3.00%. However, if Russell obtains the loan in Canadian dollars, it will need to convert U.S. dollars back to Canadian dollars to repay the loan in one year. Suppose that Russell believes that there is a probability of 60.00% that the Canadian dollar depreciates (relative to the U.S. dollar) by 2.0000% and a probability of 40.00% that the Canadian dollar appreciates (relative to the U.S. dollar) by 10.00%

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