Bank USA just made a one-year $10 million loan that pays 10 percent interest annually. The loan

was funded with a Swiss franc-denominated one-year deposit at an annual rate of 6 percent. The

current spot rate is SF 0.95/$1. a. What will be the net interest income in dollars on the one-year loan if the spot rate at

the end of the year is SF 0.93/$1?

b. What will be the net return on the loan?

c. What is the total effect on net interest income and principal of this transaction given the end-of-year spot rates in part (a)?

d. How far can the SF/$ appreciate before the transaction will result in a loss for Bank USA?