Answered: Bank of America (USA) believes that New… | bartleby

International Financial Management

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter20: Short-term Financing

Section: Chapter Questions

Problem 3BIC

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Question

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

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