Blue Demon Bank expects that the Mexican peso will depreciate against the dollar from its spot

rate of $$0\mathrm{.}15$ to $$0\mathrm{.}13$ in $15$ days. The following interbank lending and borrowing rates exist:

Assume that Blue Demon Bank has a borrowing capacity of either $$14$ million or $80$ million pesos

in the interbank market, depending on which currency it wants to borrow. Assume $360$ days in

year for your calculations. Do not round intermediate calculations. Round your answers to the

nearest dollar.

a$.$ How could Blue Demon Bank attempt to capitalize on its expectations without using deposited

funds? Estimate the profits that could be generated from this strategy.

Blue Demon Bank can capitalize on its expectations by borrowing

converting

it to

$,$ lending the

$,$ and repaying the

loan.

The expected profit is $

b$.$ Assume all the preceding information with this exception: Blue Demon Bank expects the peso

to appreciate from its present spot rate of $$0\mathrm{.}15$ to $$0\mathrm{.}19$ in $30$ days. How could it attempt to

capitalize on its expectations without using deposited funds? Estimate the profits that could be

generated from this strategy.

Blue Demon Bank can capitalize on its expectations by borrowing

$,$ converting

it to

lending the

$,$ and repaying the

Ioan.