An FI Has a 1-Year 8-Percent US$160 Million Loan Financed

question 206

Multiple Choice

An FI has a 1-year 8-percent US$160 million loan financed with a 1-year 7-percent UK£100 million CD. The current exchange rate is $1.60/£. If at the end of the year, the exchange rate is $1.65/£, what is the spread earned on the loan by the FI in dollars after adjusting fully for exchange rates?

• A)-$3,750,000.
• B)-$1,250,000.
• C)+$1,250,000.
• D)+$3,750,000.
• E)+$5,000,000.

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