Question
Sun Bank USA has purchased a 16 million one-year Australian dollar loan that pays 13 percent interest annually. The spot rate of U.S. dollars for
Sun Bank USA has purchased a 16 million one-year Australian dollar loan that pays 13 percent interest annually. The spot rate of U.S. dollars for Australian dollars is $0.6250/A$1. It has funded this loan by accepting a British pound (BP)denominated deposit for the equivalent amount and maturity at an annual rate of 11 percent. The current spot rate of U.S. dollars for British pounds is $1.6000/1.
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