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Business, 18.04.2020 00:18 rylanzuk

To benefit from the low correlation between the Canadian dollar (C$) and the Japanese yen (¥), Luzar Corporation decides to borrow 50% of funds needed in Canadian dollars and the remainder in yen. The domestic financing rate for a one-year loan is 7%. The Canadian one-year interest rate is 6% and the Japanese one-year interest rate is 10%. Luzar has determined the following possible percentage changes in the two individual currencies as follows:

Currency Percentage Change Probability
Canadian dollar 2.0% 30%
Canadian dollar 4.0% 70%
Japanese yen 3.0% 60%
Japanese yen 1.0% 40%

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To benefit from the low correlation between the Canadian dollar (C$) and the Japanese yen (¥), Luzar...
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