Q.9: NatWest bank UK has purchased a 12 million one year Euro loan that pays 12 percent interest annually. The spot rate for Euro is 1.11/ (British pound). NatWest has funded this loan by accepting a US S denominated deposit for the equivalent amount and maturity at an annual rate of 10 percent. The current spot rate of US dollar is 0.81/$. (Marks: 8) a. What is the net interest income earned in British pounds on this one year transaction if the spot rates at the end of the year are 1.21/ and 0.95/S? b. What should be the USS to spot rate in order for the bank to earn a net interest margin of 5 percent? c. Does your answer to part (b) imply that the British pound should appreciate or depreciate against the US$? d. What is the total effect on net interest income and principal of this transaction given the end-of-year spot rates in part (a)? Q.9: NatWest bank UK has purchased a 12 million one year Euro loan that pays 12 percent interest annually. The spot rate for Euro is 1.11/ (British pound). NatWest has funded this loan by accepting a US S denominated deposit for the equivalent amount and maturity at an annual rate of 10 percent. The current spot rate of US dollar is 0.81/$. (Marks: 8) a. What is the net interest income earned in British pounds on this one year transaction if the spot rates at the end of the year are 1.21/ and 0.95/S? b. What should be the USS to spot rate in order for the bank to earn a net interest margin of 5 percent? c. Does your answer to part (b) imply that the British pound should appreciate or depreciate against the US$? d. What is the total effect on net interest income and principal of this transaction given the end-of-year spot rates in part (a)