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Baylor Bank believes the New Zealand dollar (N.Z $) will change in its value over the next 5 days from $0.50 to $0.48. The following
Baylor Bank believes the New Zealand dollar (N.Z $) will change in its value over the next 5 days from $0.50 to $0.48. The following annual interest rates apply: Lending Rate for U.S.$ : 7.10% Borrowing Rate for U.S.$ : 7.50% Lending Rate for N.Z $ : 6.80% Borrowing Rate for N.Z $ : 7.25% Baylor Bank has the capacity to borrow either NZ$10 million or equivalent $ amount at the current spot rate. Baylor Bank desires to make a speculative gain based on its forecast and the current interest rates. In order to make speculative gain, what move should this bank undertake? Answer Borrow N.Z.$ and lend $ Borrow $ and lend $ Borrow N.Z.$ and lend N.Z.$ Borrow $ and lend N.Z.$
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