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Business, 18.03.2021 01:40 juanchylj

ABZ Co. expects that the pound will depreciate from $1.75 to $1.71 in one year. It has no money to invest, but it could borrow money to invest. A bank allows the company to borrow either 1 million dollars or 1 million pounds for one year. It can borrow dollars at 7% or British pounds at 5% for one year. It can invest in a risk-free dollar deposit at 6% for one year or a risk-free British deposit at 4% for one year. Determine th expected profit or loss (in dollars) if ABZ Co. pursues a strategy to capitalize on the expected depreciation of the pound.

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ABZ Co. expects that the pound will depreciate from $1.75 to $1.71 in one year. It has no money to i...
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