Assume the Following Information Regarding U

question 28

Multiple Choice

Assume the following information regarding U.S. and European annualized interest rates:
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Trensor Bank can borrow either $20 million or €20 million. The current spot rate of the euro is $1.13. Furthermore, Trensor Bank expects the spot rate of the euro to be $1.10 in 90 days. What is Trensor Bank's dollar profit from speculating if the spot rate of the euro is indeed $1.10 in 90 days?
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• A)$579,845.
• B)$583,800.
• C)$588,200.
• D)$584,245.
• E)$980,245.

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Definitions:

Bacon and Eggs

A popular breakfast dish in various cultures consisting of fried bacon and eggs.

Cross-Price Elasticity

A measure used in economics to show how the quantity demanded of one good changes in response to a change in the price of another good.

Inferior Goods

Goods for which demand decreases as the income of the consumer increases, opposite to normal goods.

Normal Goods

Goods for which demand increases as consumers' income increases, holding all other factors constant.