Citibank expects that C$ will change in its value over the next 6 days from $0.8

Question

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, what move should this bank undertake?

Borrow C$ and lend C$

Borrow $ and lend $

Borrow C$ and lend $

Borrow $ and lend C$

Borrow C$ and lend C$

Borrow $ and lend $

Borrow C$ and lend $

Borrow $ and lend C$

Explanation / Answer

Borrow $ and lend C$

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