Gulliver Travel Agencies thinks Effective micro rate interest rules in Europe ar

Question

Gulliver Travel Agencies thinks Effective micro rate interest rules in Europe are low. The firm borrows Euros at 9 percent for one year. During this time pined the dollar falls 16 percent against the euro. What is the effective interest rate on the loan for one year? (Consider live 16 percent fall in the value of the dollar as well as the interest payment.) 2) Talmud Book Company borrows SI 8.100 for 45 days at II percent interest. What is the dollar cost of the loan? (Use a 360-day year Do not round intermediate calculations and round your final answer to 2 decimal places.) Cost of loan S

Explanation / Answer

Answer:1 Gulliver Travel Agencies

9% interest

16%decline in the dollar (increased cost in euros)

25% Total effective cost

Answer:2

Dollar cost of loan = Amount borrowed × Interest rate*(Days loan is outstanding/Days in the year)

=$18100*11%*45/360

=$248.88

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