Question: Problem 9 - 6 ( LG 9 - 5 ) Sun Bank USA has purchased a 8 million oneyear Australian dollar loan that pays 1

Problem 9-6(LG 9-5) Sun Bank USA has purchased a 8 million oneyear Australian dollar loan that pays 12 percent interest annually, The spot rate of U.S. dollars for Australian dollars (AUD per USD) is \(\$ 0.625\) per \( A \$ 1\), it has funded this loan by accepting a British pound (BP)-denominated deposit for the equivalent amount and maturity at an annual rate of 10 percent. The current spot rate of U.S, dollars for British pounds (GBP per USD) is \(\$ 1.60\) per \(\mathbf{\& 1}\). a. What is the net interest Income eamed in dollars on this one-year transaction if the spot rate of U.S. dollars for Australian dollars and U.S. dollars for \(\mathrm{BP}_{5}\) at the end of the year are \(\$ 0.588\) per \(\mathrm{A}\$ 1\) and \(\$ 1.848\) per \(1\), respectively? Note: Negative amount shouid be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in dollars, rather than in millions of dollars. Round your final answer to the nearest whole dollar. (e.g.,32) b. What should the spot rate of U.S dollars for BP's be at the end of the year in order for the bank to earn a net interest income of \(\$ 210,000\)(disregarding any change in principal values)? Note: Round your answer to 5 decimal places. (e.g..32.16161)
Problem 9 - 6 ( LG 9 - 5 ) Sun Bank USA has

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!