Assume the Following Information Regarding U Trensor Bank Can Borrow Either $20 Million or €20 Million

question 56

Multiple Choice

Assume the following information regarding U.S. and European annualized interest rates:
$\begin{array} { l c c } \text { Eurrenc } & \text { Lendine Rtite } & \text { Earrawine Ratp } \\\text { U.S. Dallw (\$) } & 6.73 \% & 7.20 \% \\\text { Eura (E) } & 6.80 \% & 7.28 \%\end{array}$
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?

• A) $579,845.
• B) $583,800.
• C) $588,200.
• D) $584,245.
• E) $980,245.

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Definitions:

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