Liabilities & Equity		Assets
20,000,000	U.S. CDs (9%)	10,000,000	U.S. loans (10%)
		10,000,000	U.K. loans in sterling (15%)
20,000,000	Total	20,000,000	Total

A U.S. FI is raising all of its $20 million liabilities in dollars (one-year CDs) but investing 50%
in U.S. dollar assets (one-year maturity loans) and 50% in U.K. pound sterling assets
(one-year maturity loans). Suppose the promised one-year U.S. CD rate is 9%, to be paid
in dollars at the end of the year, and that one-year, credit risk-free loans in the US. are
yielding only 10%. Credit risk-free one-year loans are yielding 15% in the UK.
A) What amount, in sterling, will the FI have to repatriate back to the U.S. after one year if the
exchange rate remains constant at $1.55 to 1. B) What would be the weighted return on the bank's portfolio of investments ?