Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Sun Bank USA has purchased a 32 million one-year Australian dollar loan that pays 12 percent interest annually. The spot rate of U.S. dollars for

image text in transcribed
Sun Bank USA has purchased a 32 million one-year Australian dollar loan that pays 12 percent interest annually. The spot rate of U.S. dollars for Australian dollars (AUD/USD) is $0.625/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 10 percent. The current spot rate of U.S. dollars for British pounds (GBP/USD) is $1.60/1. a. What is the net interest income earned in dollars on this one-year transaction if the spot rate of U.S. dollars for Australian dollars and U.S. dollars for BPS at the end of the year are $0.588/A$1 and $1.850/1, respectively? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to the nearest whole number. (e.g., 32)) b. What should the spot rate of U.S. dollars for BPS be at the end of the year in order for the bank to earn a net interest income of $340,000 (disregarding any change in principal values)? (Round your answer to 5 decimal places. (e.g., 32.16161))

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions

Question

They provide a neat frame around the type.

Answered: 1 week ago