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Suppose that a U.S. FI has the following assets and liabilities: The promised onc-year U.S. CD rate is 4 percent, to be paid in dollars

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Suppose that a U.S. FI has the following assets and liabilities: The promised onc-year U.S. CD rate is 4 percent, to be paid in dollars at the end of the year; the one-year, default risk-free loans in the United States are yielding 6 percent; and default risk-free one-year loans are yielding 10 percent in Germany. The exchange rate of dollars to euros at the beginning of the year is $1.08/elementof 1. a. Calculate the dollar proceeds from the German loan at the end of the year, the return on the FI's investment portfolio, and the net interest margin for the FI if the spot foreign exchange rate rises to $1.35/elementof 1 over the year. b. Calculate the dollar proceeds from the German loan at the end of the year, the return on the FI's investment portfolio, and the net interest margin for the FI if the spot foreign exchange rates falls to $1.05/elementof 1 over the year

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