A U.S. bank can earn 6% on dollar loans or 8% on pound denominated loans to British concerns. The bank currently has $500 million in dollar loans and British pound loans equivalent to $400 million. The loans are funded by dollar denominated CDs paying 4%. All loans and CDs are on single payment terms. The current spot rate for pounds is $1.8604 and the one year forward rate is $1.8405.TWhat is the bank's spread if they fully hedge their exposure to pounds?
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- Mississippi Company borrows ¥80,000,000 at a time when the exchange rate is 110 ¥/$. Principal is to be repaid two years from now, and interest is for the yen bond is 4% per annum, paid annually in yen. Suppose the yen is expected to depreciate relative to the dollar to 120 ¥/$ in one year, and 125¥/$ in two years. Under these circumstances, what would be the effective dollar cost of this loan for Mississippi Company? Please enter your answer as % -- e.g. if your answer is 2.34% type in 2.34.Cullumber needs to borrow $4 million for an upgrade to its headquarters and manufacturing facility. Management has decided to borrow using a five-year term loan from its existing commercial bank. The prime rate is 4 percent, and Cullumber’s current rating is prime + 2.57 percent. The yield on a five-year U.S. Treasury note is 1.91 percent, and the three-month U.S. Treasury bill rate is 0.12 percent. What is the estimated loan rate for the five-year bank loan?Beez Kneez co. needs to borrow $4 million for an upgrade to its headquarters and manufacturing facility. Management has decided to borrow using a five-year term loan from its existing commercial bank. The prime rate is 3 percent, and Beez Kneez's current rating is prime + 2.40 percent. The yield on a five-year U.S. Treasury note is 1.90 percent, and the three-month U.S. Treasury bill rate is 0.08 percent. What is the estimated loan rate for the five-year bank loan? Estimated loan rate is_____%
- Ghana Company enters into an IRG arrangement with Meterbank for 9 months, P800,000 loan starting 3 months from now. The IRG rate is at 11% and the bank quotes a premium of P4,000. Compute for the effective interest rate if the actual interest rate 3 months from now is 8%Cal Bank believes the US Dollar will appreciate over the next five days from GHS 4.48 to GHS 4.50. The following annual interest rates apply: Currency Lending Rate Borrowing RateDollars 7.10% 7.50%Ghana Cedis 6.80% 7.25% Cal Bank has the capacity to borrow either GHS 10 million or $5 million. If Cal Bank's forecast is correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)?Sheridan needs to borrow $4 million for an upgrade to its headquarters and manufacturing facility. Management has decided to borrow using a five-year term loan from its existing commercial bank. The prime rate is 4 percent, and Sheridan’s current rating is prime + 2.49 percent. The yield on a five-year U.S. Treasury note is 1.99 percent, and the three-month U.S. Treasury bill rate is 0.10 percent. What is the estimated loan rate for the five-year bank loan? Estimated loan rate is enter the estimated loan rate in percentages %
- Sheridan needs to borrow $4 million for an upgrade to its headquarters and manufacturing facility. Management has decided to borrow using a five-year term loan from its existing commercial bank. The prime rate is 4 percent, and Sheridan’s current rating is prime + 2.49 percent. The yield on a five-year U.S. Treasury note is 1.99 percent, and the three-month U.S. Treasury bill rate is 0.10 percent. What is the estimated loan rate for the five-year bank loan?The York Company has arranged a line of credit that allows it to borrow up to $45 milion at any time. The interest rate is .621 percent per month. Additionally, the company must deposit 3 percent of the amount borrowed in a non-interest bearing account. The bank uses compound interest on its line-of-credit loans. What is the effective annual rate on this line of credit? Multiple Choices 6.40% 7.71% 7.95% 7.06% 8.83%XYZ entered into a currency swap with its bank, and borrowed $10 million at 9% and swaps for a 11% yen loan. The spot exchange rate is 95/$. How much is the annual interest to be paid to the bank.
- A firm in the UK places £42,000 (forty-two thousand pounds) in a bond paying 6% compounded quarterly and leaves it there as collateral for a loan. Find (a) the balance in the account after 1 year and (b) the intererestDePaul International Bank is a U.S. bank that wants to speculate on the dollar-euro exchange rate. A euro (€) costs $1.08 today. The bank expects it to cost $1.12 in 4 months. Current annual interest rates are as follows: Currency Borrowing rate Lending rate Euro 4.8% 4.1% U.S. dollar 7.5% 6.6% The bank doesn't want to use any of its own money, but could borrow either $10,000,000 or €10,000,000. Assume there are 30 days in every month and 360 days per year. Ignore compounding when working with the interest rates. Part 1 What is the expected profit from the trade after 4 months (in $)?Below is the information regarding U.S. and Canadian annualized interest rates: Currency Lending Rate Borrowing Rate U.S Dollar ($) 6.73% 7.20% Euro (€) 6.80% 7.28% Note: Spot rate of Euro is $1.13 An international bank can borrow either 20 million U.S. dollars or 20 million euro. The bank expects the spot rate of the euro is $1.10 in 90 days, which is equal to ______ profit. A. $583,800 B. $588,200 C. $584,245 D. $579,845