North Bank has been borrowing in the U$.$S$.$ markets and lending abroad, thereby incurring foreign exchange risk. In a recent transaction, it issued a one$-$year $$2\mathrm{.}40$ million $CD$ at $5$ percent and is planning to fund a loan in British pounds at $7$ percent for a $2$

$1$

percent expected spread. The spot rate of U$.$S$.$ dollars for British pounds is $$\frac{1\mathrm{.}450}{}1.$

points

a$.$ However, new information now indicates that the British pound will appreciate such that the spot rate of U$.$S$.$ dollars for British pounds is $$\frac{1\mathrm{.}43}{}1$ by year$-$end. Calculate the loan rate to maintain the $2$ percent spread.

b$.$ The bank has an opportunity to hedge using one$-$year forward contracts at $1\mathrm{.}46$ U$.$S$.$ dollars for British pounds. Calculate the net interest margin if the bank hedges its forward foreign exchange exposure.

c$.$ Calculate the loan rate to maintain the $2$ percent spread if the bank intends to hedge its exposure using the forward rates.

$($For all requirements, do not round intermediate calculations. Round your answers to $2$ decimal places. $($e$.$g$.,32\mathrm{.}16))$

Answer is complete but not entirely correct.

$\backslash$table$[[,],[$a$.,$Loan rate,$9\mathrm{.}96,\%$