Question
(5pts) Bank of America (USA) believes that New Zealand dollar will appreciate over the next 90 days from US$0.48/NZ$ to US$0.50/NZ$. The following annual interest
- (5pts) Bank of America (USA) believes that New Zealand dollar will appreciate over the next 90 days from US$0.48/NZ$ to US$0.50/NZ$. The following annual interest rates can be applied:
Currency Lending rate (Annual) Borrowing rate (Annual)
US dollar 7.00% 7.20%
New Zealand dollar 6.80% 7.00%
Bank of American has the capacity to borrow $5million from Chase bank. If Bank of America's forecast is correct, what will be its US dollar profit of Bank of America from this foreign exchange speculation over the 90 days period?
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Foundations Of Finance
Authors: Arthur J. Keown, John H. Martin, J. William Petty
10th Edition
0135160618, 978-0135160619
