Assume the Following Information $\bullet$ Interest Rate on Borrowed Euros Is 5 Percent Annualized

question 71

Multiple Choice

Assume the following information.
$\bullet$ Interest rate on borrowed euros is 5 percent annualized.
$\bullet$ Interest rate on dollars loaned out is 6 percent annualized.
$\bullet$ Spot rate is 1.10 euros per dollar (one euro = $0.909) .
$\bullet$ Expected spot rate in five days is 1.15 euros per dollar.
$\bullet$ Fabrizio Bank can borrow 10 million euros.
If Fabrizio Bank attempts to capitalize on the above information, its profit over the five-day period is

• A)2,653,597.22 euros.
• B)455,266.81 euros.
• C)452,426.04 euros.
• D)none of the above

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