1. DCBC Bank expects that the Singapore dollar will depreciate against the dollar from its spot rate of $.43 to $.42 in

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1. DCBC Bank expects that the Singapore
dollar will depreciate against the dollar from its spot rate of
$.43 to $.42 in 60 days. The following interbank lending and
borrowing rates exist. (Assume these rates are quoted in the
interbank market for a 360-day calendar year)
Lending
Rate Borrowing
Rate
U.S.
dollar

7.0%

7.2%
Singapore dollar

22.0%
24.0%
DCBC Bank considers borrowing 10 million Singapore
dollars in the interbank market and investing the funds in dollars
for 60 days. Estimate the profits (or losses) that could be earned
from this strategy. Should the Bank pursue this strategy? Give a
thorough
explanation.