You can borrow $25,000 at 1% interest for 1 year.The exchange rate for Australia is 1.25AUS/1US.The Australian Treasury is offering 2.5% risk free investments.What is the total profit you can make in 1 year?

Question

Quizplus · Accepted Answer

Step 1 - Convert your dollars to Australian dollars using the spot exchange rate.
25,000 × 1.25 = 31,250
Step 2 - Compute the value of your Australian investment.
31,250 × 1.025 = 32,031.25AUS
Step 3 - Convert Australian dollars back to US dollars. 11ea7fdb_fc3a_d1c8_a768_db48cebc7d05_TB2902_11 = $25,625
Step 4 - Compute how much you are going to have to repay.
$25,000 × 1.01 = $25,250
Step 5 - Compute your profit from the investment
$25,625 - $25,250 = $375

You Can Borrow $25,000 at 1% Interest for 1 Year