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【正文】 ean annualized interest rates: Currency Lending Rate Borrowing Rate . Dollar ($) % % Euro (€) % % Trensor Bank can borrow either $20 million or €20 million. The current spot rate of the euro is $. Furthermore, Trensor Bank expects the spot rate of the euro to be $ in 90 days. What is Trensor Bank’s dollar profit from speculating if the spot rate of the euro is indeed $ in 90 days? A) $579,845. B) $583,800. C) $588,200. D) $584,245. E) $980,245. SOLUTION: ? Borrow €20 million. ? Convert the €20 million to €20,000,000 $ = $22,600,000. ? Invest the $22,600,000 at an annualized rate of % for 90 days. ? $22,600,000 [1 + % (90/360)] ? = $22,980,245 ? Determine euros owed: ? ? €20,000,000 [1 + % (90/360)] = €20,364,000. ? Determine dollars needed to repay euro loan: ? €20,364,000 $ = $22,400,400. ? The dollar profit is: ? $22,980,245 – $22,400,400 = $579,845. Answer: D 8. The equilibrium exchange rate of pounds is $. At an exchange rate of $ per pound: A) . demand for pounds would exceed the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market. B) . demand for pounds would be less than the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market. C) . demand for pounds would exceed the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market. D) . demand for pounds would be less than the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market. E) . demand for pounds would be equal to the supply of pounds for sale and ther
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