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How could tmc bank attempt to capitalize

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Reference no: EM132930636

Question - TMC Bank expects that the Singapore dollar will depreciate against the dollar from its spot rate of $.75 to $.70 in 60 days. The following interbank lending and borrowing rates (annual rate) exist:

 

Lending Rate

Borrowing Rate

U.S. dollar

5.0%

6.0%

Singapore dollar

4.8%

5.6%

Assume that TMC Bank has a borrowing capacity of either $7.5 million or SGD10 million in the interbank market, depending on which currency it wants to borrow.

a. How could TMC Bank attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy. (Show your work step by step)

b. Assume all the preceding information with this exception: TMC Bank expects the SGD to appreciate from its present spot rate of $.75 to $.80 in 60 days. How could it attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy. (Show your work step by step)

Reference no: EM132930636

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