Millon National Bank has 10 million British pounds () in one-year assets and 8 million in one-year liabilities. In addition, it has one-year liabilities of 4 million euros (). Assets are earning 8 percent and both liabilities are being paid at a rate of 8 percent. All interest and principal will be paid at the end of the year.

1.What is the net interest income in dollars if the spot prices at the end of the year are $1.50/ and 1.65/$?

2.What is the net interest income in dollars if the spot prices at the end of the year are $1.35/ and 1.35/$ and the liabilities instead cost 7 percent instead of 8 percent?

3.If the year-end spot exchange rate for the British pound is $1.50/ and the liabilities pay 8 percent, what is the maximum that the can appreciate and the bank still maintain a zero profit?