Question 7 (3.33 points) Bank One believes the Euros (@) will depreciate over the next 90 days from $1.13 to $1.10. The following annual interest rates apply Currency Dollars Euros () Lending Rate 6.73% 6.80% Borrowing Rate 7209 7.28% Bank One has the capacity to borrow either 20 million or $20 million. If Bank One's forecast is correct, how shall Bank One implement its speculating trading activities and what will its dollar profit be from speculation over the 90-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)? (30/360 convention used for the interest calculation, i.e. assuming 360 days a year) Bank Ine shall borrow 20 million Doing so, Bank One will have the speculative profit of $584,245. O Bank One shall borrow $20 million Doing so, Bank One will have the Speculative profit of $588,200. Bank One shall borrow 20 million Doing so, Bank One will have the speculative profit of $579.845. Bank One shall borrow $20 million Doing so. Bank One will have the speculative profit of $583 800 Question 8 (3.33 points) Assume that the United States invests heavily in government and corporate securities of New Zealand. In addition, residents of New Zealand invest heavily in the United States. Approximately $10 trillion on worth of investment transactions occur between these two countries each year. The total dollar value of trade transactions per year is about $1 trillion. Then directly influences their exchange rate the most income differentials only Interest rate differentials inflation differentials only inflation and income differentials inflation and interest rate differentials