Question
In: Finance
Bank of America (USA) believes that New Zealand dollar will appreciate over the next 90 days...
Bank of America (USA) believes that New Zealand dollar will appreciate over the next 90 days from US$0.48/NZ$ to US$0.50/NZ$. The following annual interest rates can be applied:
Currency Lending rate (Annual) Borrowing rate (Annual)
US dollar 7.10% 7.50%
New Zealand dollar 6.80% 7.25%
Bank of American has the capacity to borrow $5million from Chase bank. If Bank of America’s forecast is correct, what will be its US dollar profit of Bank of America from this foreign exchange speculation over the 90 days period?
Group of answer choices
About $5,093,750
About $5,296,875
About $203,125
About $266,451
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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Lending Rate
Borrowing Rate
Dollars
4.50%
6.50%
New Zealand dollar (NZ$)
6.40%
8.00%
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Currency
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Include the relevant graph and a brief explanation. You must use
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Currency
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Borrowing rate
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(Adjusted for 30-day period)
U.S....
Suppose that Denver Financial Co. expects the exchange rate of the New Zealand dollar (NZ$) to...
Suppose that Denver Financial Co. expects the exchange rate of
the New Zealand dollar (NZ$) to appreciate from its current level
of 0.5 to 0.55 in 30 days. Denver Financial seeks to capitalize on
this potential opportunity.
Suppose that Denver Financial begins by borrowing $30,000,000
and converting it to New Zealand dollars (NZ$).
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....
Suppose that Denver Financial Co. expects the exchange rate of the New Zealand dollar (NZ$) to...
Suppose that Denver Financial Co. expects the exchange rate of
the New Zealand dollar (NZ$) to appreciate from its current level
of 0.5 to 0.55 in 30 days. Denver Financial seeks to capitalize on
this potential opportunity.
Suppose that Denver Financial begins by borrowing $30,000,000
and converting it to New Zealand dollars (NZ$).
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....
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