The bank invests USD $100 million in  assets to yield 6.0% and EUR 100 million to yield 8.0%. However, in the case, the bank  employs an on-balance-sheet hedge. Consequently, it borrows USD $100 million paying 4.0%  and borrows EUR 100 million also paying 4.0%. This on-balance-sheet hedge matches the EUR  100 million invested abroad by funding with EUR 100 million. At the beginning of the year, the exchange rate is EUR/USD $1.40 which moves to EUR/USD $1.26 by the end of the year. What is the bank's ROI given it has employed this on-balance-sheet hedge?

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