Solved: Calculate mexican peso cost of dollar loan in percentages, Accounting Basics

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Calculate mexican peso cost of dollar loan in percentages

Question: Suppose on that on January 1st a Mexican firm borrows $20 million from Citibank (USA) for one year at 8.00% interest per annum. The loan was taken when the spot rate was USD/MXP3.40. At the end of the one year when the loan was repaid, the exchange rate was USD/MXP 5.80. Based on the above information, calculate the Mexican Peso cost of the dollar loan in percentages.

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Accounting Basics: Calculate mexican peso cost of dollar loan in percentages

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