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 Rate Dollars                                             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)?

International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter21: International Cash Management
Section: Chapter Questions
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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 Rate
Dollars                                             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)?

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