Question: Please show all the needed work! Thank you! Given interest rates: Deposit rate: 0.40% in & 1.0% in Borrow rate: 0.50% in & 1.1% in

Please show all the needed work! Thank you!

  • Given interest rates:
    • Deposit rate: 0.40% in & 1.0% in
    • Borrow rate: 0.50% in & 1.1% in
  • Investment Plan:
    • You use your own funds: $100
    • You can borrow additional funds either 250 or 200
  • Spot rates:
    • EUR/USD = 1.2 & GBP/USD = 1.5
  • Expectation:
    • USD is expected to depreciate by 2.5% against EUR in 1 month.
    • USD is expected to appreciate by 1.5% against GBP in 1 month.
  1. Cross rates (2 point)
    1. GBP (appreciates/depreciates) against EUR by _______________

  1. EUR (appreciates/depreciates) against GBP by _______________

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