1. DCBC Bank expects that the Singapore dollar will depreciate against the dollar from its spot rate of $.43 to $.42 in 60 days. The following interbank lending and borrowing rates exist. (Assume these rates are quoted in the interbank market for a 360-day calendar year)

Lending Rate Borrowing Rate

U.S. dollar 7.0% 7.2%

Singapore dollar 22.0% 24.0%

DCBC Bank considers borrowing 10 million 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 the Bank pursue this strategy? Give a thorough explanation.