Question
A treasurer of an Westpac bank issues a 1-year, AUD$1 million CD at 3.5 percent annual interest to finance a Canadian investment. The treasurer invests
A treasurer of an Westpac bank issues a 1-year, AUD$1 million CD at 3.5 percent annual interest to finance a Canadian investment. The treasurer invests C $1.309 million in 2-year fixed-rate Canadian bonds selling at par and paying 6.4 percent annually. The treasurer expects to liquidate the position in 1 year upon maturity of the CD. Spot exchange rates are AUD $0.764 per Canadian dollar. What is the end-of-year profit or loss on the banks cash position if in one year the exchange rate falls to AUD$0.749/C $1? Assume there is no change in interest rates. (Choose the closest answer)
a.$7298.95
b.$-55339.25
c.$8920.94
d.$8109.95
e.$-50308.41
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