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Suppose that Denver Financial Co. expects the exchange rate of the New Zealand dollar (NZ$) to appreciate from its current level of 0.5 to 0.55
Suppose that Denver Financial Co. expects the exchange rate of the New Zealand dollar (NZ\$) to appreciate from its current level of 0.5 to 0.55 in 30 days. Denver Financial seeks to capitalize on this potential opportunity. Suppose that Denver Financial begins by borrowing $40,000,000 and converting it to New Zealand dollars (NZ\$). The following table shows the short-term interest rates (annualized) in the interbank market. Suppose that Denver Financial takes its NZ\$80,000,000.00 and invests it. Denver Financial can earn a 0.0053 percent return after 30 -days. Hint: Assume 360 days in a year. At the end of 30-days, Denver Financial will have a total of NZ (New Zealand dollars) from the investment
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