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Can you explain with steps please including the formulas? Q4. New Zealand Citizen Bank just made a one-year NZ$10 million loan that pays 10 percent
Can you explain with steps please including the formulas?
Q4. New Zealand Citizen Bank just made a one-year NZ\$10 million loan that pays 10 percent interest annually. The loan was funded with an Australian dollar-denominated (A\$) one-year deposit at an annual rate of 6 percent. The current spot rate is A$0.9500/NZ$1. (a)What will be the net interest income in New Zealand dollars on the one-year loan if the spot rate at the end of the year is A\$0.9300/NZ\$1? (b) What will be the net return on the loan? (c)What is the total effect on net interest income and principal of this transaction given the end-of-year spot rates in part (a)? (d) How far can the A\$/NZ\$ appreciate before the transaction will result in a loss for New Zealand Citizen BankStep by Step Solution
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