Problem 3:

Bronco Bank has the following assets and liabilities:

Assets	Liabilities
$300 million U.S. loans (6%)	$300 million U.S. CDs (4%)
$200 million equivalent German loans (10%) (loans made in euros)	$200 million equivalent German CDs (7%) (deposits raised in euros)

The current spot exchange rate of dollars for euros is $1.25/.

Calculate the 1) return on the banks investment portfolio, 2) the average cost of funds, and 3) the net interest margin/spread for the bank assuming: a) the spot exchange rate does not change over the year. b) the spot exchange rate is $1.15/ at years end. c) the spot exchange rate is $1.35/ at years end. Round all percentages to 4 decimal places.