North Bank has been borrowing in the U. S. markets and lending abroad, thereby incurring foreign exchange risk. In a recent transaction, it issued a one-year $1.40 million CD at 5 percent and is planning to fund a loan in British pounds at 9 percent for a 4 percent expected spread. The spot rate of U. S. dollars for British pounds is $1.454/£1. a. However, new information now indicates that the British pound will appreciate such that the spot rate of U. S. dollars for British pounds is $1.43/£1 by year-end. Calculate the loan rate to maintain the 4 percent spread. b. The bank has an opportunity to hedge using one-year forward contracts at 1.46 U. S. dollars for British pounds. Calculate the net interest margin if the bank hedges its forward foreign exchange exposure. c. Calculate the loan rate to maintain the 4 percent spread if the bank intends to hedge its exposure using the forward rates.

1. descriptive statistics quickly describe large amounts of data can predict future stock returns with surprising accuracy statisticians understand non-numeric information, like colors refer mainly to patterns that can be found in data 2. a 15% return on a stock means that 15% of the original purchase price of the stock returns to the seller at the end of the year 15% of the people who purchased the stock will see a return the stock is worth 15% more at the end of the year than at the beginning the stock has lost 15% of its value since it was originally sold 3. a stock purchased on january 1 cost $4.35 per share. the same stock, sold on december 31 of the same year, brought in $4.75 per share. what was the approximate return on this stock? 0.09% 109% 1.09% 9% 4. a stock sells for $6.99 on december 31, providing the seller with a 6% annual return. what was the price of the stock at the beginning of the year? $6.59 $1.16 $7.42 $5.84