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Metro Inc. anticipates that the exchange rate of the Australian dollar ( A $ ) will appreciate from its current level of $ 0 .

Metro Inc. anticipates that the exchange rate of the Australian dollar (A$ ) will appreciate
from its current level of $0.70 to $0.73 in 60 days. Metro Inc. can borrow $21 million on a
short-term basis from other banks. The current short-term interest rates (annualized) in the
interbank market are as follows:
a) Calculate Metro Inc.'s speculative profit in A$ and US$.
b) If City Corp. expects the Australian dollar exchange rate to be $0.68 on day 60 and
can borrow A$30 million, determine City Corp.'s speculative profit in A$ and US $
using the given interest rates.
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