Suppose a bank in Germany borrows $2 million U.S at an interest rate of 5%. The bank then converts the amount into euros, the local currency, at a rate of 2 euros per dollar. It lends the €4 million at an interest rate of 15% to other firms. After one year, the loan is repaid with interest, and the bank receives €4.6 million. The bank now wants to pay back the debt. If the current exchange
rate is 3 euros per dollar, the bank will:
a. face a loss of $570,000 approximately.
b. face a loss of $470,000 approximately.
c. make a profit of $500,000 approximately.
d. make a profit of $320,000 approximately.
a
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The largest percentage of banks' holdings of securities consist of
A) Treasury and government agency securities. B) tax-exempt municipal securities. C) state and local government securities. D) corporate securities.
Answer the following statement(s) true (T) or false (F)
1. To meet its emission reduction targets under the Kyoto Protocol, the European Union developed and instituted a greenhouse gas (GHG) allowance trading program. 2. In the United States, there is a federally enforced greenhouse gas (GHG) allowance trading program. 3. The first mandatory cap-and-trade program launched in the United States was the one established by the Western Climate Initiative (WCI). 4. In the market for fossil-fuel-based electricity, too many resources are allocated to production because the associated MSC is above the MPC. 5. The gasoline tax is the most effective type of a product charge to reduce carbon dioxide emissions.
Inflation is troublesome to consumers because of the following effects, except
A. Household incomes may be rising slower than the overall prices B. The purchasing power of people's savings would decrease C. Workers' wages may be rising faster than the overall price level D. The standard of living would fall if a household has a fixed nominal income
Assume the marginal propensity to consume is 0.8. If consumer spending increases by $20 billion, then real GDP will:
A. Increase by $100 billion B. Decrease by $100 billion C. Increase by $16 billion D. Will not change