Assume that a bank has assets located in London worth 100 million on which it...
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Accounting
Assume that a bank has assets located in London worth 100 million on which it earns an average of 8% per year. The bank has 150 million in liabilities on which it pays an average of 6% per year. The current spot rate is 1 = $1.25 a) If the exchange rate at the end of the year is 1 = $1.50, will the dollar have appreciated or depreciated against the pound? b) Is the bank net short or net long? Given the change in the exchange rate, will the bank make money or lose money?
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