Suppose that instead of funding the $100 million investment in 12 percent British loans with CDs issued

Question:

Suppose that instead of funding the $100 million investment in 12 percent British loans with CDs issued in the United Kingdom, the FI manager in problem 16 hedges the foreign exchange risk on the British loans by immediately selling its expected one-year pound loan proceeds in the forward FX market. The current forward one-year between dollars and pounds is $1.53/£1.
a. Calculate the return on the FI’s investment (including the hedge) and the net interest margin for the FI over the year.
b. Will the net return be affected by changes in the dollar for pound spot foreign at the end of the year? Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...