ABC Bank believes the New Zealand dollar will appreciate over the next five days from $.48 to $.50. The following annual interest rates apply: Currency Lending Rate Borrowing Rate Dollars 7.10% 7.50% New Zealand dollar (NZ$) 6.80% 7.25% ABC Bank has the capacity to borrow either NZ$10 million or $5 million. If ABC Bank's forecast is correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)? Also, find % profit

ABC Bank believes the New Zealand dollar will appreciate over the next five days from $.48 to $.50. The following annual interest rates apply: Currency Lending Rate Borrowing Rate Dollars 7.10% 7.50% New Zealand dollar (NZ$) 6.80% 7.25% ABC Bank has the capacity to borrow either NZ$10 million or $5 million. If ABC Bank's forecast is correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)? Also, find % profit

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter4: Exchange Rate Determination

Section: Chapter Questions

Problem 20QA

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BOA (US Bank) believes that New Zealand dollar will appreciate over the next 90 days from US$0,48/NZ$ to US$0.50/NZS. The following information is available. Country Interest Rate (annual) 7.20% New Zealand 6.8% BOA has the capacity to borrow $5 million from Chase Bank. If BOA forecasting is correct, what will be its US$ profit from this FX speculation over the 90 days period? US O around $0.26 million O around $0.21 million O around $5.10 million. O around $5.30 million
Bank A expects the New Zealand dollar (NZ$) is going to appreciate in the next five days from $0.48 to $0.50, and the following annual interest rates are: Currency Lending Rate Borrowing Rate Dollars 7.10% 7.50% New Zealand dollar (NZ$) 6.80% 7.25% Bank A has the capacity to borrow either NZ$10 million or $5 million. If the bank's expectation is correct, the dollar profit can be generated over the five-day period is ___________. A. $134,862 B. $491,225 C. $503,320 D. $208,044
Cal Bank believes the US Dollar will appreciate over the next five days from GHS 4.48 to GHS 4.50. The following annual interest rates apply: Currency Lending Rate Borrowing RateDollars 7.10% 7.50%Ghana Cedis 6.80% 7.25% Cal Bank has the capacity to borrow either GHS 10 million or $5 million. If Cal Bank's forecast is correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)?
Cal Bank believes the Ghanaian Cedi will appreciate over the next five days from GHS 4.48 to GHS 4.50. The following annual interest rates apply: Currency Lending Rate Borrowing RateDollars 7.10% 7.50%Ghana Cedis 6.80% 7.25% Cal Bank has the capacity to borrow either GHS 10 million or $5 million. If Cal Bank's forecast is correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)?
Suppose that Denver Financial Co. expects the exchange rate of the New Zealand dollar (NZ$) to depreciate from its current level of 0.5 to 0.45 in 30 days. Denver Financial seeks to capitalize on this potential opportunity. Suppose that Denver Financial begins by borrowing NZ$50,000,000 and converting it to U.S. dollars. The following table shows the short-term interest rates (annualized) in the interbank market. Currency Lending Rate Borrowing rate (Adjusted for 30-day period) (Adjusted for 30-day period) U.S. Dollars 6.72% 7.20% New Zealand Dollars (NZ$) 6.48% 6.96% After exchanging $50,000,000 to dollars, Denver Financial will have
Bank of America (USA) believes that New Zealand $ will appreciate over the next 90 days from $0.48/NZ$ to $0.50/NZ$. The following annual interest rate can be applied: Currency US dollar NZ$ Lending rate (Annual) Borrowing rate(Annual) 7.10% 7.50% 6.80% 7.25% BOA has, the capacity to borrow $5million from Chase Bank. If BOA's forecast is correct, what would be BOA's US$ profit from this FX speculation over the 90 day period? O $0.207 million $5.093 million $5.3 million $0.556 million
MSN Bank expects that the New Zealand dollar (NZD) will depreciate against the U.S. dollar (USD) from its spot rate of $.44 to $.41 in 90 days. The following interbank lending and borrowing rates exist: Annual borrowing rate Annual lending rate USD 7.20% 7.00% NZD 10.00% 9.00% MSN Bank considers borrowing 2 million New Zealand dollars in the interbank market and investing the funds in U.S. dollars for 90 days. Estimate the profits (or losses) that could be earned from this strategy. Should MSN Bank pursue this strategy? Show necessary calculations and discuss.
MSN Bank expects that the New Zealand dollar (NZD) will depreciate against the U.S. dollar (USD) from its spot rate of $.44 to $.41 in 90 days. The following interbank lending and borrowing rates exist: Annual borrowing rate Annual lending rate USD 7.20% 7.00% NZD 10.00% 9.00% MSN Bank considers borrowing 2 million New Zealand dollars in the interbank market and investing the funds in U.S. dollars for 90 days. Estimate the profits (or losses) that could be earned from this strategy. Should MSN Bank pursue this strategy? Show necessary calculations and discuss (50 words excluding calculations).
Suppose that Denver Financial Co. expects the exchange rate of the New Zealand dollar (NZ$) to depreciate from its current level of 0.5 to 0.45 in 30 days. Denver Financial seeks to capitalize on this potential opportunity. Suppose that Denver Financial begins by borrowing NZ$50,000,000 and converting it to U.S. dollars. The following table shows the short-term interest rates (annualized) in the interbank market. Currency U.S. Dollars New Zealand Dollars (NZ$) investment. Lending Rate Borrowing rate (Adjusted for 30-day period) (Adjusted for 30-day period) 6.72% 6.48% In the previous stages of this problem, you found that Denver Financial initially borrowed funds and must repay the equivalent of $22,630,500.00 after 30-days. However, using those funds, Denver Financial was able to secure $25,140,000.00 after 30-days (principal plus interest) due to their Thus, Denver's speculative profit is 7.20% 6.96% (U.S. dollars).
Suppose that Denver Financial Co. expects the exchange rate of the New Zealand dollar (NZ$) to depreciate from its current level of 0.5 to 0.45 in 30 days. Denver Financial seeks to capitalize on this potential opportunity. Suppose that Denver Financial begins by borrowing NZ$50,000,000 and converting it to U.S. dollars. The following table shows the short-term interest rates (annualized) in the interbank market. Currency U.S. Dollars New Zealand Dollars (NZ$) investment. Lending Rate Borrowing rate (Adjusted for 30-day period) (Adjusted for 30-day period) 6.72% 6.48% In the previous stages of this problem, you found that Denver Financial initially borrowed funds and must repay the equivalent of $22,630,500.00 after 30-days. However, using those funds, Denver Financial was able to secure $25,140,000.00 after 30-days (principal plus interest) due to their Thus, Denver's speculative profit is 7.20% 6.96% (U.S. dollars).
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