19. Suppose that a U.S. FI has the following assets and liabilities: The promised one-year U.S. CD rate is 5 percent to be paid in dollars at the end of the year; the one-year, default risk-free loans are yielding 6 percent in the United States; and one-year default risk-free loans are yielding 12 percent in the United Kingdom. The exchange rate of dollars for pounds at the beginning of the year is $1.25/1. a. Calculate the dollar proceeds from the UK. investment at the end of the year, the return on the F's investment portfolio, and the net retum for the Fil if the spot foreign exchange rate has not changed over the year. b. Calculate the dollar proceeds from the UK. investment at the end of the year, the return on the Fi's investment portfolio, and the net retum for the Fi if the spot foreign exchange rate falls to $1.15 if1 over the year. c. Calculate the dollar proceeds from the U.K. investment at the end of the year, the return on the FI's investment portfolio, and the net retum for the FI if the spot foreign exchange rate rises to $1.35/f1 over the year. 20. Suppose that instead of funding the $100 million investment in 12 percent British loans with U.S. CDs, the FI manager in problem 19 funds the British loans with $100 million equivalent one-year pound CDs at a rate of 8 percent. Now the balance sheet of the FI would be as follows: a. Calculate the return on the FI's investment portfolio, the average cost of funds, and the net return for the lil if the spot foreign exchange rate falls to $1.15/L1 over the year. b. Calculate the retum on the FI's investment portfolio, the average cost of funds, and the net return for the FI if the spot foreign exchange rate rises to $1.35/f1 over the year. 19. Suppose that a U.S. FI has the following assets and liabilities: The promised one-year U.S. CD rate is 5 percent to be paid in dollars at the end of the year; the one-year, default risk-free loans are yielding 6 percent in the United States; and one-year default risk-free loans are yielding 12 percent in the United Kingdom. The exchange rate of dollars for pounds at the beginning of the year is $1.25/1. a. Calculate the dollar proceeds from the UK. investment at the end of the year, the return on the F's investment portfolio, and the net retum for the Fil if the spot foreign exchange rate has not changed over the year. b. Calculate the dollar proceeds from the UK. investment at the end of the year, the return on the Fi's investment portfolio, and the net retum for the Fi if the spot foreign exchange rate falls to $1.15 if1 over the year. c. Calculate the dollar proceeds from the U.K. investment at the end of the year, the return on the FI's investment portfolio, and the net retum for the FI if the spot foreign exchange rate rises to $1.35/f1 over the year. 20. Suppose that instead of funding the $100 million investment in 12 percent British loans with U.S. CDs, the FI manager in problem 19 funds the British loans with $100 million equivalent one-year pound CDs at a rate of 8 percent. Now the balance sheet of the FI would be as follows: a. Calculate the return on the FI's investment portfolio, the average cost of funds, and the net return for the lil if the spot foreign exchange rate falls to $1.15/L1 over the year. b. Calculate the retum on the FI's investment portfolio, the average cost of funds, and the net return for the FI if the spot foreign exchange rate rises to $1.35/f1 over the year
