An FI has purchased $($borrowed$)$ a one$-$year $$14$ million Eurodollar deposit at an annual interest rate of $5\mathrm{.}4$ percent. It has invested

these proceeds in one$-$year Euro $()$ bonds at an annual rate of $8\mathrm{.}9$ percent after converting them at the current spot rate of

$\frac{1\mathrm{.}754}{\text{\$}}.$ Both interest and principal are paid at the end of the year. What is the spread earned by the bank if the end$-$of$-$year

exchange rate is $\frac{1\mathrm{.}7666}{\text{\$}}?$

a$.8\mathrm{.}12\%$

b$.4\mathrm{.}71\%$

c$.9\mathrm{.}68\%$

d$.4\mathrm{.}28\%$

e$.2\mathrm{.}72\%$

Assume that annual interest rates are $8$ percent in the United States and $4$ percent in Japan. An FI can borrow $($by issuing CDs$)$ or

lend $($by purchasing CDs$)$ at these rates. The spot rate is $$\frac{0\mathrm{.}0080}{}.$

If the forward rate is $$\frac{0\mathrm{.}0097}{?},$ what is the expected return if the $FI$ arbitrage using a sum of $$1\mathrm{.}8$ million?

a$.0\mathrm{.}03\%$

b$.22\mathrm{.}10\%$

c$.4\mathrm{.}03\%$

d$.26\mathrm{.}95\%$

e$.18\mathrm{.}10\%$