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Question
An FI has purchased (borrowed) a one-year $10 million Eurodollar deposit at an annual interest rate of 6 percent. It has invested these proceeds in one-year Euro () bonds at an annual rate of 6.5 percent after converting them at the current spot rate of 1.75/$. Both interest and principal are paid at the end of the year.
What is the spread earned if the bank can sell one-year forward Euros at 1.755/$?
A. -0.70 percent.
B. -0.25 percent.
C. 0.00 percent.
D. 0.20 percent.
E. 0.50 percent.
Answer
This answer is hidden. It contains 1 characters.
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