Explanation:
USD1M × ARS2.27 × 1.0325 = ARS2,343,775
ARS2,343,775 / 2.30 = USD1,019,033
USD1,019,033 − (USD1M × 1.02) = −$967
−967 / 1M = −0.000967
−0.000967 × 2 = −0.19%
(Book 3, Module 35.2, LO 35.h)
Ultimate access to all questions.
Question 52
Ion National Bank issues a 6-month, USD1 million CD at 4.0% and funds a loan in Argentine pesos (ARS) at 6.50%. The spot rate for the ARS was ARS2.27 per USD at the time of the transaction. In 6 months, the ARS depreciated to ARS2.30 per USD. What is the realized nominal annual spread on the loan?
A
−0.07%.
B
−0.19%.
C
0.11%.
D
0.13%.
No comments yet.