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ank A expects the New Zealand dollar (NZ$) is going to appreciate in the next five days from $0.48 to $0.50, and the following annual interest rates are: Currency              Lending Rate          Borrowing Rate Dollars              7.10%          7.50% New Zealand dollar (NZ$)     6.80%                  7.25% Bank A has the capacity to borrow either NZ$10 million or $5 million. If the bank's expectation is correct, the dollar profit can be generated over the five-day period is ___________. A.

ank A expects the New Zealand dollar (NZ$) is going to appreciate in the next five days from $0.48 to $0.50, and the following annual interest rates are: Currency              Lending Rate          Borrowing Rate Dollars              7.10%          7.50% New Zealand dollar (NZ$)     6.80%                  7.25% Bank A has the capacity to borrow either NZ$10 million or $5 million. If the bank's expectation is correct, the dollar profit can be generated over the five-day period is ___________. A.

International Financial Management
International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter9: Forecasting Exchange Rates
Section: Chapter Questions
Problem 1ST
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Bank A expects the New Zealand dollar (NZ$) is going to appreciate in the next five days from $0.48 to $0.50, and the following annual interest rates are:

Currency              Lending Rate          Borrowing Rate

Dollars              7.10%          7.50%

New Zealand dollar (NZ$)     6.80%                  7.25%

Bank A has the capacity to borrow either NZ$10 million or $5 million. If the bank's expectation is correct, the dollar profit can be generated over the five-day period is ___________.

A.

$134,862

B.

$491,225

C.

$503,320

D.

$208,044

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