What is the net interest income earned in dollars

Assignment Help Financial Management
Reference no: EM131329410

Sun Bank USA has purchased a 8 million one-year Australian dollar loan that pays 16 percent interest annually. The spot rate of U.S. dollars for Australian dollars is $0.6250/A$1. It has funded this loan by accepting a British pound (BP)–denominated deposit for the equivalent amount and maturity at an annual rate of 14 percent. The current spot rate of U.S. dollars for British pounds is $1.6000/£1.

a. What is the net interest income earned in dollars on this one-year transaction if the spot rate of U.S. dollars for Australian dollars and U.S. dollars for BPs at the end of the year are $0.5880/A$1 and $1.8480/£1, respectively? (Negative amount should be indicated by a minus sign.)

Net interest income $

b. What should the spot rate of U.S. dollars for BPs be at the end of the year in order for the bank to earn a net interest income of $200,000 (disregarding any change in principal values)? (Round your answer to 4 decimal places. (e.g., 32.1616))

  Spot rate of U.S. dollars $

Reference no: EM131329410

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is your required return in order to invest in company

You are valuing stock in Tofrandi Naturals and are estimating their Beta at 0.2, the risk free rate at 3.16%, and equity risk premium at 6.69. What is your required return in order to invest in this company?

  Does the first bond sell at a discount or at a premium

Today, on Nov 1 2016, you decide to diversify your retirement portfolio and talk to your financial advisor about investing in bonds. She recommends two different Canadian Treasury bonds, both of which have a $1,000 face value and pay semi-annual coup..

  What is the one year forward one year rate

The one-year and two-year zero rates are 1% and 2% respectively. What is the one-year forward one-year rate (that is, f11)? Assume all rates are annually compounded.

  Discuss the proposition that differences in the performance

industry analysis please respond to the followingdiscuss the proposition that differences in the performance of various

  What is the next dividend you would receive

The common stock of Old Betsy Flags is constantly selling for $28 per share. The company has been growing at a constant annual rate of 4%, and this growth is expected to continue for an infinite period. The required rate on the stock is 11%. If you b..

  Aims1 to allow students to explore in greater detail the

aims1. to allow students to explore in greater detail the major learning outcomes of the module and to demonstrate a

  The order qualified for quantity discount

A wholesaler ordered 14 bolts of drapery fabric at $5.50 per yard. Each bolt had 60 yards. The order qualified for a quantity discount of 2%.  A vendor who normally sells with a 3% cash discount is asked to sell with an 8% discount. What will be the ..

  What is present value of the annuity

A six-year annuity that makes 24 quarterly payments of $6,000 will begin 7 years from now with the first payment coming 7.25 years from now. If the discount rate is 10.1 percent compounded quarterly, what is the present value of the annuity?

  Driven per year for leasing and buying to cost the same

How many kilometers must a car be driven per year for leasing and buying to cost the same? Use 10% interest and year-end cost. Leasing: $0.20 per kilometer Buying: $5000 purchase cost, 3-year life, salvage $1200. $0.04 per kilometer for gas and oil, ..

  What spot rate of exchange year

A US investor has $10 million to invest in interest-bearing securities for one year. He can invest in US dollars at 2 ¾ % p.a. or in pounds sterling at 4 ½ % p.a. The current spot rate (American terms) is 1.8172 dollars per pound. At what spot rate o..

  Calculate the covariance between the returns on VBN

VBN is a microcap stock included in the Wilshire 5000 index. The following lists the actual returns on VBN and the Wilshire 5000 index for 6 recent years. Calculate the covariance between the returns on VBN and the Wilshire 5000 index. Is VBN highly,..

  About the basis of stock index futures is true

Which of the following statements about the "basis" of stock index futures is true?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd