Question
Blackrock Hedge Fund can borrow 1 million (euros) at an annual rate of 5% or $1 million at an annual rate of 4.50%. Blackrock can
Blackrock Hedge Fund can borrow 1 million (euros) at an annual rate of 5% or $1 million at an annual rate of 4.50%. Blackrock can invest euros in a 1-year certificate of deposit (C.D.) in the Eurozone and earn an annual interest rate of 4.5% or it can invest dollars in a 1-year C.D. in the U.S. and earn an annual interest rate of 4.00%. The current spot rate of the euro is $1.65/. Blackrock believes that the euro will depreciate significantly over the next year and expects the spot rate to be $1.50/ in one year. If Blackrock pursues a speculation strategy to capitalize on the expected depreciation of the euro, determine Blackrock's profit from this speculation if the spot rate of the euro is indeed $1.50/ in one year. *Note: Assume that Blackrock will start by borrowing either 1 million or $1 million.
Group of answer choices
None of these answers are correct
$94,000
$95,000
$141,000
$149,250
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