Whitehouse International Bank expects that the Jamaican dollar will depreciate against the dollar from its spot rate of $.0070 to $ .0065 in 15 days. The following interbank lending and borrowing rates exist
US Dollar Lending Rate 9.0%
US Dollar borrowing rate 9.3%
Jamaican Dollar Lending rate 15.5%
Jamaican Dollar borrowing rate 15.7%
Assume that Whitehouse International Bank can borrow $100 million JAD in the interbank market.
Required:
How could Whitehouse International Bank attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy. (7 marks