1. The INR appreciates 4% versus the USD. The EUR depreciates 10% versus the USD. What’s the approximate appreciation or depreciation we might see in the EUR/INR exchange rate?
2. MSU Bank believes the New Zealand dollar will appreciate over the next 6 months from $.41/NZ$ to $.43/NZ$. The following 6-month interest rates apply: (the rates are periodic rates so you do not need to adjust them at all – we do not need to multiply by 180/360 or anything like that)
Currency Lending Rate Borrowing Rate
Dollars 3.5% 4.25%
New Zealand dollar (NZ$) 2.6% 3.05%
MSU Bank has the capacity to borrow either NZ$10 million or $5 million. If MSU Bank’s forecast if correct, what will its U.S. dollar profit be from speculation over the 6-month period?