Suppose that a U.S. FI has the following assets and liabilities:

Assets

$10 million cash (in dollars)

$100 million U.S. loans (one year) (in dollars) (12%)

$100 million equivalent UK loans (one year) (loans made in pounds) (10%)

Liabilities

$200 million U.S. CDs (one year) (in dollars) (5%)

$10 million borrowed funds (in dollars) (6%)

The current spot exchange rate is $1.5/

d. If the spot foreign exchange rate falls to $1.45/1 over the year, calculate

iv. the net interest income for the FI at the end of year (5 marks)

e. If a borrower exercises $10 million of a loan commitment,present the balance sheet of this FI if this FI meets the demand by using:

i. Stored liquidity (10 marks)

ii. Purchased liquidity (10 marks)