Question
Glenvor Bank believes the New Zealand dollar will move over the next fifteen days from $0.62 to $0.65. The following annual interest rates apply: Currency
Glenvor Bank believes the New Zealand dollar will move over the next fifteen days from $0.62 to $0.65.
The following annual interest rates apply:
Currency Lending Rate Borrowing Rate
Dollars 6.00% 8.00%
New Zealand dollar (NZ$) 8.10% 10.25%
Amount to be borrowed $10,000,000.00 $10,000.00
Glenvor Bank has the capacity to borrow either NZ$10 million or $10 million. Assume Glenvor Bank's forecast is correct and it attempts to capitalize on its expectations without using deposited funds?
The depreciating currency is _____, the interest rate on the borrowed funds over the 15-day period is ______ and the dollar (US) profit from speculation over the fifteen-day period is _______.
a. NZ$, 0.25%, $467,372.31
b. US$, 0.333%, $416.67
c. US$, 0.333%, $485,920.70
d. US$, 0.00333%, $485,920.70
e. NZ$, 0.427%, $537,448.67
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started