Answer all questions. Each question is worth 10 marks Suppose that a U.S. FI has the following assets and liabilities Liabilities Assets $500 million $1,000 million U.S. loans (one year) in dollars $300 million equivalent U.K. loans (one year) (loans made in pounds) $200 million equivalent Turkish loans (one year) (loans made in Turkish lira) U.S. CDs (one year) in dollars The promised one-year U.S. CD rate is 4 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; one-year, default risk-free loans are yielding 8 percent in the United Kingdom; and one-year, default risk-free loans are yielding 10 percent in Turkey. The exchange rate of dollars for pounds at the beginning of the year is S1.6/1, and the exchange rate of dollars for Turkish lira (TL) at the beginning of the year is $0.5533/TL1. 4. Suppose that instead of funding the $300 million investment in 8 percent British loans with U.S. CDs, the FI manager funds the British loans with $300 million equivalent one-year pound CDs at a rate of 5 percent and that instead of funding the $200 million investment in 10 percent Turkish loans with U.S. CDs, the FI manager funds the Turkish loans with $200 million equivalent one-year Turkish lira CDs at a rate of 6 percent. What will the FI's balance sheet look like after these changes have been made? 10 marks] 5. Using the information in part 4, calculate the return on the FI's loan portfolio, the average cost of funds, and the net return for the FI if the pound spot foreign exchange rate falls to $1.45/1 and the lira spot foreign exchange rate falls to $0.52/TL1 over the year. [10 marks] 6. Using the information in part 4, calculate the returm on the FI's loan portfolio, the average cost of funds, and the net return for the FI if the pound spot foreign exchange rate rises to $1.70/1 and the lira spot foreign exchange rate falls to $0.58/TL1 over the year. [10 marks] Answer all questions. Each question is worth 10 marks Suppose that a U.S. FI has the following assets and liabilities Liabilities Assets $500 million $1,000 million U.S. loans (one year) in dollars $300 million equivalent U.K. loans (one year) (loans made in pounds) $200 million equivalent Turkish loans (one year) (loans made in Turkish lira) U.S. CDs (one year) in dollars The promised one-year U.S. CD rate is 4 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; one-year, default risk-free loans are yielding 8 percent in the United Kingdom; and one-year, default risk-free loans are yielding 10 percent in Turkey. The exchange rate of dollars for pounds at the beginning of the year is S1.6/1, and the exchange rate of dollars for Turkish lira (TL) at the beginning of the year is $0.5533/TL1. 4. Suppose that instead of funding the $300 million investment in 8 percent British loans with U.S. CDs, the FI manager funds the British loans with $300 million equivalent one-year pound CDs at a rate of 5 percent and that instead of funding the $200 million investment in 10 percent Turkish loans with U.S. CDs, the FI manager funds the Turkish loans with $200 million equivalent one-year Turkish lira CDs at a rate of 6 percent. What will the FI's balance sheet look like after these changes have been made? 10 marks] 5. Using the information in part 4, calculate the return on the FI's loan portfolio, the average cost of funds, and the net return for the FI if the pound spot foreign exchange rate falls to $1.45/1 and the lira spot foreign exchange rate falls to $0.52/TL1 over the year. [10 marks] 6. Using the information in part 4, calculate the returm on the FI's loan portfolio, the average cost of funds, and the net return for the FI if the pound spot foreign exchange rate rises to $1.70/1 and the lira spot foreign exchange rate falls to $0.58/TL1 over the year. [10 marks]