Question-1 Bank Speculation of Exchange Rate Movements Royal Bank expects that the exchange rate of the...

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Question-1 Bank Speculation of Exchange Rate Movements Royal Bank expects that the exchange rate of the Canadian dollar (C$) to appreciate from its present value of $.556 to $.602 in 45 days. Royal bank can borrow $45 million on short term basis from other banks. The annualized short term interest rates are: Currency Lending/Deposit Rate US Dollars 5.70% Canadian Dollars 5.50% Calculate Speculative profit of the bank into US$ and in C$ Question-2 Borrowing Rate 6.98% 6.60% Scotia Bank expects that the exchange rate of the New Zealand dollar (NZ$) to depreciate from its present value of $.540 to $.480 in 60 days. Scotia bank can borrow NZ$50 million on short term basis from other banks. The annualized short term interest rates are: Currency Lending/Deposit Rate 6.50% US Dollars New Zealand Dollars 6.12% Calculate Speculative profit of the bank into US$ and in NZ$ Borrowing Rate 7.15% 7.02% Question-1 Bank Speculation of Exchange Rate Movements Royal Bank expects that the exchange rate of the Canadian dollar (C$) to appreciate from its present value of $.556 to $.602 in 45 days. Royal bank can borrow $45 million on short term basis from other banks. The annualized short term interest rates are: Currency Lending/Deposit Rate US Dollars 5.70% Canadian Dollars 5.50% Calculate Speculative profit of the bank into US$ and in C$ Question-2 Borrowing Rate 6.98% 6.60% Scotia Bank expects that the exchange rate of the New Zealand dollar (NZ$) to depreciate from its present value of $.540 to $.480 in 60 days. Scotia bank can borrow NZ$50 million on short term basis from other banks. The annualized short term interest rates are: Currency Lending/Deposit Rate 6.50% US Dollars New Zealand Dollars 6.12% Calculate Speculative profit of the bank into US$ and in NZ$ Borrowing Rate 7.15% 7.02%

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Answer Question 1 Step 1 Borrow 45 Million 698 Step 2 Convert into C and invest ... View the full answer