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Sun Bank USA has purchased a 16 million one-year Australian dollar loan that pays 12 percent
interest annually. The spot rate of US. dollars for Australian dollars (AUDIUSD) is $0.757!A$1. It has
funded this loan by accepting a British pound (BP)—denominated deposit for the equivalent amount
and maturity at an annual rate of 10 percent. The current spot rate of U.S. dollars for British pounds (GBPJ'USD) is $1 .320!£1. a. What is the net interest income earned in dollars on this one-year transaction if the spot rate of
U.S. dollars for Australian dollars and US. dollars for BPs at the end of the year are $0.?15!A$1 and $1.520f21, respectively? b. What should the spot rate of U.S. dollars for BPs be at the end of the year in order for the bank to
earn a net interest income of $200,000 (disregarding any change in principal values)?

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