Currency risk and borrowed funds
(a) Mr. Shanku has borrowed dollars in the U.S., but is now concerned about its currency risk. What alternatives does he have to limit his risk? Be specific in your recommendation.
(b) Mr. Shanku wonders whether it is reasonable to expect real rates of interest to be identical across countries. He is curious to know what this implies about parity. Explain your answer(s) clearly to Mr.Shanku.