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Suppose the value of the Polish zloty moves from Z 1000 = $1

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Suppose the value of the Polish zloty moves from Z 1000 = $1 at the start of the year to Z 1,800 at the end of the year. At the same time, the Polish price level changes from an index of 100 on January 1 to 134 on December 31. U.S. inflation during the year was 4.5%. If the one-year interest rate on the zloty is 44%, what was the real dollar cost of borrowing the zloty during the year?

 

Paper#25734 | Written in 18-Jul-2015

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