7. Institutional speculation 1. 2. 3. 4. STEP: 4 of 4 Suppose that Denver Financial Co. expects the exchange rate of the New Zealand dollar (NZ$) to appreciate from its current level of 0.5 to 0.53 in 30 days. Denver Financial seeks to capitalize on this potential opportunity. Suppose that Denver Financial begins by borrowing $20,000,000 and converting it to New Zealand dollars (NZ$). The following table shows the short-term interest rates (annualized) in the interbank market. Currency U.S. Dollars Lending Rate Borrowing rate (Adjusted for 30-day period) (Adjusted for 30-day period) 6.82% 6.58% 7.30% 7.06% New Zealand Dollars (NZ$) $2,930,101.88 $2,704,709.42 In the previous stages of this problem, ver Financial initially borrowed funds and must repay the equivalent of NZ$37,965,408.81 after 30-days. However, using those fu $49,355,031.45 al was able to secure NZ$40,219,333.33 after 30-days (principal plus interest) due to their investment. $2,253,924.52 Thus, Denver's speculative profit is NZ (New Zealand dollars).