Problem:
ABC Inc. borrows 100m JPY when JPY spot rate is JPY120/$. The JPY interest rate for the loan is 3%. One year later when ABC pays back the JPY principal and interest, the exchange rate is JPY 95/$.
Required:
What is the dollar cost of ABC's JPY loan? Show your all work and describe in detail.
A. 3%
B. 30.1%
C. -18.46%
D. None of the above