The Ghana Cocoa Board (GCB) is contemplating borrowing one year funds in anticipation of the...
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The Ghana Cocoa Board (GCB) is contemplating borrowing one year funds in anticipation of the coming cocoa season which starts in September/October, 2021. GCB can borrow from the local financial market in Ghana or borrow a portfolio of funds made up of UK pounds and Euros. The information below is the borrowing rates, and the probabilities of expected strengthening of the international currencies vis--vis the cedi. Borrowing Rates Ghana Cedis - 18% UK Pounds - 10% Euros - 8% Strengthening of UK Pounds Probability % Change in Spot Rate 30% 10% 70% 5% Strengthening of Euros Probability 40% % Change in Spot Rate 8% 60% 6% Required: If GCB should borrow a portfolio made up of 60% UK pounds and 40% euros, determine whether GCB should borrow from the local financial market or borrow the portfolio of funds made up of UK pound and the euros
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