Problem:
A Swiss bank converted 1 million Swiss francs to euros to make a euro loan to a customer when the exchange rate was 1.85 francs per euro. The borrower agreed to repay the principle plus 3.75% interest in 1 year. The borrower repaid euros at loan maturity and when the loan was repaid the exchange rate was 1.98 francs per dollar.
Required:
Question: What was the bank's franc rate of return?
- -2.82%
- 9.94%
- 5.71%
- 7.75%
- 11.04%
Note: Please explain comprehensively and give step by step solution.