Annualized interest rates-foreign currency

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Reference no: EM131048131

Assume the following annualized interest rates: Bank Pinetree can borrow either $5 million or foreign currency (FC) 5 million. The current spot rate of the foreign currency (FC) is $1.13 and the Bank expects the spot rate to be $1.10 in 90 days. What is the bank's dollar profit from speculating if the spot rate of the foreign currency (FC) is indeed $1.10 in 90 days? Assume the lending rate for FC and $ is 6.8% and 6.73%, respectively. The borrowing rate for FC and $ is 7.28% and 7.2% for FC and $, respectively.

A. $106,372

B. $220,478

C. $144,961

D. $269,517

Reference no: EM131048131

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