ank 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.

ank 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.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter4: Exchange Rate Determination

Section: Chapter Questions

Problem 20QA

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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.
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)?
Diamond Bank expects that the Singapore dollar will depreciate against the dollar from its spot rate of $.43 to $.42 in 60 days. The following interbank lending and borrowing rates exist: Lending Rate Borrowing Rate U.S. dollar 7.0% 7.2% Singapore dollar 22.0% 24.0% Diamond Bank considers borrowing 10 million Singapore dollars in the interbank market a nd investing the funds in dollars for 60 days. Estimate the profits (or losses) that could be earned from this strategy. Should Diamond Bank pursue this strategy?
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
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
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).
Assume UK one-year money market interest rate is 8%. A Ghanaian firm is planning to borrow British pounds, convert them into cedi and repay the loan at the end of one year. Available information is that the cedi currency will depreciate by 21% against the pound sterling by the time of payment of the loan. Determine the effective financing cost of borrowing the British pound. Will you finance with a local loan costing 28% per annum or the pound sterling loan?
Blue Demon Bank expects that the Mexican peso will depreciate against the dollar from its spot rate of $0.15 to $0.12 in 10 days. The following interbank lending and borrowing rates exist: Assume that Blue Demon Bank has a borrowing capacity of either $10 million or 70 million pesos in the interbank market, depending on which currency it wants to borrow. Assume 360 days in year for your calculations. Do not round intermediate calculations. Round your answers to the nearest dollar. How could Blue Demon Bank attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy. Blue Demon Bank can capitalize on its expectations by borrowing (DOLLARS OR PESOS) , converting it to (DOLLARS OR PESOS), lending the (DOLLARS OR PESOS), and repaying to (DOLLARS OR PESOS) loan. The expected profit is $ BLANK? Assume all the preceding information with this exception: Blue Demon Bank expects the peso to appreciate from its present…
Suppose the central bank of Economy B wants to increase the dollar money supply with an increase in bank reserves by around $36 billion over a short period of time. Further suppose that a commerical bank in Economy B wants to borrow such an amount from the central bank for nine days by means of a repo agreement with an annualized interest rate of 3.526% p.a. and its $36 billion government securities as collateral. Assume that there are 360 days per year in your calculation. Illustrate with calculations how this transaction would proceed.
An American rm owes SFr 6, 000, 000.00 payable in one year. The current spot it$1.3750/SFr. A Swiss bank is paying 1.50% on deposits or will lend at 6.50% AU.S. bank is paying 4.50% or will lend at 8.00%. The rm would like to hedge this exposurewith money market hedging. How much do they need to borrow today