You are the CEO of the Bank USA. The bank just made a one$-$year $$10$ million loan that pays $10\%$ interest annually. The loan was funded with a Swiss franc$-$denominated one$-$year deposit at an annual rate of $6\%.$ The current spot rate is SFr$0\mathrm{.}9500/$$$1($CHF$9,500/$ $$1).(8$ Points$)$ a$.$ What will be the net interest income in dollars on the one$-$year loan if the spot rate at the end of the year is SFr$0\mathrm{.}9300/$$$1?(3$ Points$)$ Swiss deposit account issued in Swiss Franc $($CHF$)=$ Deposit amount in US$ x Spot exchange rate $=10$m x Interest income at year$-$end $($US$$)=$ Loan amount x Loan rate Interest expense at year$-$end $($US$$)=($Deposit amount in CHF x Deposit interest rate$)/$ Spot exchange rate at the end of the year $($CHF $/$ $$1)$ Net interest income $=$ Interest income $$ Interest expense b$.$ What will be the net return on the loan? $(1$ Point$)$ Answer: Net return on the loan $=$ Interest income $/$ Loan amount c$.$ What is the total effect on net interest income and principal of this transaction given the end$-$of$-$year spot rates in part $($a$)?(3$ Points$)$ Interest income and loan principal at year$-$end $($US$$)=$ Loan amount x Loan interest rate Interest expense and deposit principal at year$-$end $($US$$)=[$Deposit amount in CHF x $(1$ Deposit interest rate$)]/$ Spot exchange rate at the end of the year $($CHF $/$ $$1)$ Total income $=$ Interest income and loan principal at year$-$end $($US$$)-$ Interest expense and deposit principal at year$-$end $($US$$)$ d$.$ How far can the SFr$/$$ appreciate before the transaction will result in a loss for Bank USA? $(1$ Point$)$ Answer: Interest expense and deposit principal at year$-$end $=$ Swiss deposit account issued in Swiss Franc $($CHF$)$ x $(1$ Deposit interest rate$)]/$ Spot exchange rate at the end of the year $($CHF $/$ $$1)$