An FI Has a 1-Year 8-Percent US$160 Million Loan Financed

Multiple Choice

An FI has a 1-year 8-percent US$160 million loan financed with a 1-year 7-percent UK£100 million CD. The current exchange rate is $1.60/£. What is the cash spread earned by the FI if at the end of the year the £ is trading at $1.63/£ in the cash market? Again adjust for all exchange rate changes.

A) $1,610,000 gain.
B) $1,610,000 loss.
C) $2,670,000 loss.
D) $2,670,000 gain.
E) $2,390,000 loss.