Investment strategy-What would be its gain in dollars

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Reference no: EM131357358

Smart Banking Corp. can borrow $5 million at six percent annualized, and it can use the proceeds to invest in Canadian dollars at nine percent annualized over a six-day period. Alternatively, Smart Banking Corp. can borrow 5 million Canadian dollars at 9 percent annualized, and it can use the proceeds to invest in U.S. dollars at six percent annualized over a six-day period. The Canadian dollar is worth $0.95 and is expected to be worth $0.94 in six days. Based on this information, which investment strategy should Smart Banking Corp. choose? What would be its gain in U.S. dollars?

a. Borrow the money in U.S. dollar; $47,700

b. Borrow the money in Canadian dollar; $19,500

c. Borrow the money in U.S. dollar; $50,211

d. Borrow the money in Canadian dollar; $47,700

e. Borrow the money in Canadian dollar; $50,211

Reference no: EM131357358

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