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 for €0.83 per dollar (one € = $1.20)
$\bullet$Expected spot rate in five days is €0.85 per dollar
$\bullet$Alonso Bank can borrow €10 million
What is the euro profit to Alonso Bank over the five-day period from shorting euros and going long on dollars?

Question

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 for €0.83 per dollar (one € = $1.20)
$\bullet$Expected spot rate in five days is €0.85 per dollar
$\bullet$Alonso Bank can borrow €10 million
What is the euro profit to Alonso Bank over the five-day period from shorting euros and going long on dollars?

Quizplus · Accepted Answer

The Answer of 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 for €0.83 per dollar (one € = $1.20)
$\bullet$Expected spot rate in five days is €0.85 per dollar
$\bullet$Alonso Bank can borrow €10 million
What is the euro profit to Alonso Bank over the five-day period from shorting euros and going long on dollars?

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

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