5. Crystal Publishing Company. Crystal Publishing Company publishes books in Europe through sepa- rate subsidiaries in several countries. On a Europe- wide basis, Crystal publishing experiences uneven cash flows. Any given book creates a cash outflow during the period of writing and publishing, followed by a cash inflow in subsequent months and years as the book is sold. To handle these imbalances, Crystal decided to create an in-house bank. At the beginning of April, Crystal's in-house bank held deposits, on which it paid 4.8% interest, as follows:

At the beginning of April, Crystal's in-house bank advanced funds at an annual rate of 5.4% as follows:

The exchange rate between pounds sterling and the euro is 1.6000/.

a. What would be the net interest earnings (interest earned less interest paid, before administrative expenses), of Crystal's in-house bank for the month of April?

b. If parent Crystal Publishing subsidized the in- house for all of its operating expenses, how much more could the in-house bank loan at the begin- ning of April?

Transcribed Image Text:

From Crystal Germany 20,000,000 From Crystal Spain 5,000,000 From Crystal Britain 12,000,000