Kizspy | Question: 38
(Choose 1 answer)
Assume the following information.
+ Interest rate on borrowed euros is 5 percent annualized
+ Interest rate on dollars loaned out is 6 percent annualized
+ Spot rate for €0.83 per dollar (one € =$1.20)
+ Expected spot rate in five days is €0.85 per dollar
+ Alonso Bank can borrow €10 million
What is the euro profit to Alonso Bank over the five-day period from shorting euros and going long on dollars?
A. (i) €200,311.11
B. (ii) €207,111.11
FASTER LOW LOW
C. (iii) €201,555.56
D. None of (i), (ii), and (iii)
