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Baylor Bank believes the New Zealand dollar will depreciated over the next 30 days from $.86 to $.82. The following annual interest rates apply: Currency
Baylor Bank believes the New Zealand dollar will depreciated over the next 30 days from $.86 to $.82. The following annual interest rates apply:
Currency | Lending Rate | Borrowing Rate |
Dollars | 6.00% | 7.80% |
New Zealand dollar (NZ$) | 6.67% | 8.00% |
Baylor Bank has the capacity to borrow either NZ$12 million or $10 million. If Baylor Bank's forecast is correct, what will its dollar profit be from speculation over the 30 days period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)?
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