North Bank issued a one-year $2 million CD at 6 percent and is planning to fund a loan in British pounds at 8 percent for a 2 percent expected spread. The spot rate of U.S. dollars for British pounds is $1.42/1. The spot rate of U.S. dollars for British pounds is going to be $1.40/1 by year-end. The bank has an opportunity to hedge using one-year forward contracts at 1.47 U.S. dollars for British pounds. What is the spread if the bank hedges its forward foreign exchange exposure? Round your calculations/answers to two decimals.

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1 Calculate the expected return from the CD CD return 2000000 x 006 ... View the full answer