Assume the Following Information Regarding U

question 8

Multiple Choice

Assume the following information regarding U.S. and European annualized interest rates: 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:

Competitive Price-searcher

A market scenario where sellers actively seek out buyers by setting prices independently to capture consumer demand.

Raise Price

The act of increasing the cost at which a good or service is sold, which can affect demand, revenue, and profit margins.

Lose Sales

The phenomenon of experiencing a reduction in the number of units sold or in total revenue.

Competitive Price-searcher

A market condition where businesses actively seek to determine the optimal pricing of their goods or services relative to their competitors to gain market share.