14-93 Assume That Instead of Investing in Euro Bonds at a Fixed

question 28

Multiple Choice

14-93 Assume that instead of investing in Euro bonds at a fixed rate of 6.5 percent,the FI invests them in variable rates of LIBOR + 1.5 percent,reset every six months.The current LIBOR rate is 5 percent.Assume both interest and principal will be reinvested in six months.Assume the exchange rate remains at €1.75/$ at the end of the year.What should be the LIBOR rates in six months in order for the bank to earn a 1 percent spread?

• A)5.25 percent.
• B)5.48 percent.
• C)5.76 percent.
• D)5.86 percent.
• E)5.94 percent.

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Definitions:

Ribosomes

The cellular structures responsible for protein synthesis, found floating freely within the cytoplasm or attached to the endoplasmic reticulum.

Cellular Respiration

The metabolic process by which cells produce energy in the form of ATP from glucose, involving various biochemical pathways including glycolysis and the Krebs cycle.

Ribosomal RNA

A type of RNA that combines with proteins to form ribosomes, which are the cellular structures that assemble proteins according to genetic instructions.

Nucleolus

The nucleolus is a densely packed region within the nucleus of a cell where ribosomal RNA is synthesized and assembled into ribosomes.