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Suppose that Denver Financial Co. expects the exchange rate of the New Zealand dollar (NZ$) to depreciate from its current level of 0.5 to 0.48
Suppose that Denver Financial Co. expects the exchange rate of the New Zealand dollar (NZ\$) to depreciate from its current level of 0.5 to 0.48 in 30 days. Denver Financial seeks to capitalize on this potential opportunity. Suppose that Denver Financial begins by borrowing NZ\$60,000,000 and converting it to U.S. dollars. The following table shows the short-term interest rates (annualized) in the interbank market. In the previous stages of this problem, you found that Denver Financial initially borrowed fund $28,967,040.00 after 30-days. However, using those funds, Denver Financial was able to secure $30,168,000.00 after 30 -days (principal plus interest) due to their investment. Thus, Denver's speculative profit is (U.S. dollars)
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