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DePaul International Bank is a U.S. bank that wants to speculate on the dollar-euro exchange rate. A euro () costs $1.06 today. The bank expects

DePaul International Bank is a U.S. bank that wants to speculate on the dollar-euro exchange rate. A euro () costs $1.06 today. The bank expects it to cost $1.1 in 6 months. Current annual interest rates are as follows:

Currency Borrowing rate Lending rate
Euro 4.6% 4.1%
U.S. dollar 7.5% 6.8%

The bank doesn't want to use any of its own money, but could borrow either $10,000,000 or 10,000,000.

Assume there are 30 days in every month and 360 days per year. Ignore compounding when working with the interest rates.

Attempt 4/10 for 8 pts.

Part1

What is the expected profit from the trade after 6 months (in $)?

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