Need help solving part 6 and 7, please show ALL needed work! Thank you!

• Given interest rates:
  • Deposit rate: 0.40% in & 1.0% in
  • Borrow rate: 0.50% in & 1.1% in
• Investment Plan:
  • You use your own funds: $100
  • You can borrow additional funds either 250 or 200
• Spot rates:
  • EUR/USD = 1.2 & GBP/USD = 1.5
• Expectation:
  • USD is expected to depreciate by 2.5% against EUR in 1 month.
  • USD is expected to appreciate by 1.5% against GBP in 1 month.

1. Exchange rate in 1 month (1.8 points)
   1. EUR/USD = $1.2308

$1.20/ (1-2.5%) = 1.2308

2. USD/EUR = 0.8125

1 / (EUR/USD) 1/ $1.2308 = 0.8125

3. GBP/USD = $1.4778

$1.50/ (1 + 1.5%)

= $(1.5/ 1.015)

= $1.4778

4. USD/GBP = 0.6768

1/ (GBP/USD) 1/$1.4778= 0.6767

5. GBP/EUR = 1.2012

(GBP/USD) x (USD/EUR)

=$1.4778 / .1.2308

=1.2007

6. EUR/GBP = .8328

1/ (GBP/EUR). 1/ 1.2012 = .8328

Or you can multiply to get the same answer

2. Cross rates (2 point)
   1. GBP (appreciates/depreciates) against EUR by -3.94%

(1.2007-1.25) / 1.25= -3.94%

2. EUR (appreciates/depreciates) against GBP by 4.10%

(.8328-.80) / .80= 4.10%

3. Where to borrow? (1point)

	Borrow today	Payoff after 1 month	Payoff after 1 month in
	250	251.25	251.25
	200	202.2	242.7662

So, it is cheaper to borrow from GBP

4. Where to invest? (1point)

	Investing today	Withdraw after 1 month	Withdraw after 1 month in
	250	251	251
	200	202	242.53

So, it is better to invest in EUR

5. Today (2points)
   1. Change:

$100 to __ __________________

2. Borrow & Convert:

Borrow ____________ with _________ borrowing rate and then change __ to __

__________________

__________________

3. Deposit:

Deposit with __________________

Total deposit: __________________

6. After 1 month (2points)
   1. Receive (or withdraw):

__________________

2. Repayment:

Total payment in ____: ____________________________________

Total payment in ____: ____________________________________

After payment in ____: ____________________________________

3. Convert: __________________

7. Profit/Loss: __________________ (0.2 points)