What will its dollar profit be from speculation

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Reference no: EM131914896

Baylor Bank believes the New Zealand dollar will appreciate over the next five days from $.48 to $.50. The following annual interest rates apply:

Currency	Lending Rate	Borrowing Rate
Dollars	7.10%	7.50%
New Zealand dollar (NZ$)	6.80%	7.25%

Baylor Bank has the capacity to borrow either NZ$10 million or $5 million. If Baylor Bank's forecast is correct, what will its dollar profit be from speculation over the five-day period ?

(assuming it does not use any of its existing consumer deposits to capitalize on its expectations)?

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Reference no: EM131914896

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