Assume the following information about US and European annualized interest rates: US leading rate is 6.73%; The US loan rate is 7.20%; The European leading rate is 6.80%; The interest rate on European loans is 7.28%. A bank can borrow either $20 million or $20 million. The current spot exchange rate for the euro is $1.13. In addition, the bank expects the spot exchange rate for the euro to be $1.10 in 90 days. 

What is the bank's profit in dollars by speculating if the spot exchange rate for the euro is really $1.10 in 90 days?

Answer rating: 100% (QA)

ANSWER IS To calculate the banks profit in dollars by speculating on the spot exchange rate for the ... View the full answer