Question
MSU Bank believes the New Zealand dollar will depreciate over the next 6 months from NZ$2.20/USD to NZ$2.25/USD. The following 6-month interest rates apply: (the
MSU Bank believes the New Zealand dollar will depreciate over the next 6 months from NZ$2.20/USD to NZ$2.25/USD. The following 6-month interest rates apply: (the rates are periodic rates so you do not need to adjust them at all we do not need to multiply by 180/360 or anything like that)
Currency Lending (deposit) Rate Borrowing Rate
Dollars 1.25% 1.55%
New Zealand dollar (NZ$) 1.75% 2.05%
MSU Bank has the capacity to borrow either NZ$15 million or $8 million. If MSU Banks forecast if correct, what will its U.S. dollar profit be from speculation over the 6-month period?
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