Citibank expects that C$ will change in its value over the next 6 days from $0.8333 to $0.8444. The following annual interest rates apply:
Lending Rate for U.S$: 3.10%
Borrowing Rate for U.S$: 3.50%
Lending Rate for C$: 2.80%
Borrowing Rate for C$: 3.25%
Citibank has the capacity to borrow either C$12 million or $10 million. Citibank desires to make a speculative gain based on its forecast and the current interest rates.
In order to make speculative gain, the bank borrows in one currency and lends in other currency? what will its dollar profit be from speculation over the six-day period? Use 360 days in a year. (Please show work)
A.$104,262
B. $121, 325
C. $131,696
D. $1,051,325