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Estimate the profits that the bank can earn

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Reference no: EM133085967

1. Do you think a negative balance of payment is always bad for a country? Why or why not? Use critical thinking while answering the question based on our country 'Bangladesh'. 

2. Regent bank speculates that the Russian Rubel will depreciate against the dollar from its spot rate of $.17 to $.16 in 7 days. The current following interbank rates are stated below:

Currency

Lending Rate

Borrowing Rate

US $

8.0%

8.2%

Russian Rubel

8.5%

8.6%

Assume that Regent Bank has borrowing capacity of either 8 million US $ or 80 million Russian Rubel in the interbank market based on the currency it wants to borrow.

I. How Regent bank can capitalize on its expectations without depositing funds? Estimate the profits that the bank can earn using this strategy.

II. Regent bank speculates that the Russian Rubel will appreciate from its present spot rate of $.17 to $.18 in 10 days. How could it try to capitalize on its expectation without depositing funds? Estimate the profits that the bank can earn using this strategy.

Reference no: EM133085967

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