Question
Baylor Bank believes the New Zealand dollar will depreciate over the next 30 days from $0.53/NZD to $0.50/NZD. The following annual interest rates apply: Currency
Baylor Bank believes the New Zealand dollar will depreciate over the next 30 days from $0.53/NZD to $0.50/NZD. The following annual interest rates apply: Currency Lending Rate Borrowing Rate Dollars 6.20% 6.60% New Zealand dollar (NZD) 5.90% 6.35% Baylor Bank has the capacity to borrow either NZD 20 million or $10 million. If Baylor Banks forecast if correct, what will be its dollar profit from speculation over the 30day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectation)? Make sure to show your work step by step.
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