Question
1. ABC Bank expects that Singapore will depreciate against the dollar from its spot rate of $.43 to $42 in 60 days. The following interbank
1. ABC Bank expects that Singapore will depreciate against the dollar from its spot rate of $.43 to $42 in 60 days. The following interbank lending and borrowing rate exist:
Lending Rate Borrowing Rate
US dollar 7% 7.2%
Singapore dollar 22% 24%
ABC Bank considers borrowing 10 millions Singapore dollars in the interbank market and investing the funds in dollars for 60 days. Estimate the profits (or losses) that could be earned from this strategy. Should ABC Bank pursue this strategy?
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
11th edition
