Question
Glenn's Discount Bank raises funds by accepting $5 million from US Depositors, and promises to pay 5% on deposits. The bank uses the deposits to
Glenn's Discount Bank raises funds by accepting $5 million from US Depositors, and promises to pay 5% on deposits. The bank uses the deposits to fund $5 million worth of loans in the UK at 9%.
The current spot rate between the US $ and UK pound is $1.55/pound.
What should the spot rate be one year from now in $/pound for the bank to earn a net interest income of $85,000?
DISREGARD ANY CHANGE IN PRINCIPAL VALUES (assume the loan will continue for years and we are only looking at interest payments for next year)
Round your answer to 2 decimal places, for example 1.12.
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