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Question
An FI has a 1-year 8-percent US $160 million loan financed with a 1-year 7-percent UK ≤100 million CD. The current exchange rate is $1.60/≤.
If at the end of the year, the exchange rate is $1.65/≤, what is the spread earned on the loan by the FI in dollars after adjusting fully for exchange rates?
A. -$3,750,000.
B. -$1,250,000.
C. +$1,250,000.
D. +$3,750,000.
E. +$5,000,000.
Answer
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