15 points) assume the following information regarding u. s. and european annualized interest rates: currency lending rate borrowing rate u. s. dollar ($) 6.73% 7.20% euro (€) 6.80% 7.28% trainor bank can borrow either $20 million or €20 million. the current spot rate of the euro is $1.13. furthermore, trainor bank expects the spot rate of the euro to be $1.10 in 90 days. what is trainor bank's dollar profit from speculating if the spot rate of the euro is in fact $1.10 in 90 days?

The Trainor Bank's dollar profit from speculating if the spot rate of the euro is in fact $1.10 in 90 days is $5,79,845

Explanation:

Bank Z borrow = €20 million

Spot rate 1€ = $1.13  

Convert € in to $

€20 million *1.13 = $22.60 million  

Lend $2,26,00,000 at interest rate of 6.73% for 90 days ( Assume total number of days in a year is 360)

= $2,26,00,000 + $2,26,00,000*(90/360)*6.73%

= $2,29,80,245

We need to find the euro to be repaid  = €2,00,00,000 + €2,00,00,000*7.28%*(90/360)

= €2,03,64,000

To be repaid in $:-

€2,03,64,000*1.10 = $2,24,00,400

Profit from speculating in $ = $2,29,80,245 - $2,24,00,400

                                             = $5,79,845

Therefore, The Trainor Bank's dollar profit from speculating if the spot rate of the euro is in fact $1.10 in 90 days is $5,79,845

i believe the answer would have to be a dependable person