• Given interest rates:
  • Deposit rate: 0.40% in & 1.0% in
  • Borrow rate: 0.50% in & 1.1% in
• Investment Plan:
  • You use your own funds: $100
  • You can borrow additional funds either 250 or 200
• Spot rates:
  • EUR/USD = 1.2 & GBP/USD = 1.5
• Expectation:
  • USD is expected to depreciate by 2.5% against EUR in 1 month.
  • USD is expected to appreciate by 1.5% against GBP in 1 month.

1. Exchange rate in 1 month (1.8 points)
   1. EUR/USD = ______________

2. USD/EUR = ______________

3. GBP/USD = ______________

4. USD/GBP = ______________

5. GBP/EUR = _______________

6. EUR/GBP = _______________

2. Cross rates (2 point)
   1. GBP (appreciates/depreciates) against EUR by _______________

2. EUR (appreciates/depreciates) against GBP by _______________

3. Where to borrow? (1point)

	Borrow today	Payoff after 1 month	Payoff after 1 month in
	_________	__________________	___________________________
	_________	__________________	___________________________

So, it is cheaper to borrow from _________.

4. Where to invest? (1point)

	Investing today	Withdraw after 1 month	Withdraw after 1 month in
	_________	__________________	___________________________
	_________	__________________	___________________________

So, it is better to invest in ___________.

5. Today (2points)
   1. Change:

$100 to __ __________________

2. Borrow & Convert:

Borrow ____________ with _________ borrowing rate and then change __ to __

__________________

__________________

3. Deposit:

Deposit with __________________

Total deposit: __________________

6. After 1 month (2points)
   1. Receive (or withdraw):

__________________

2. Repayment:

Total payment in ____: ____________________________________

Total payment in ____: ____________________________________

After payment in ____: ____________________________________

3. Convert: __________________

7. Profit/Loss: __________________ (0.2 points)