The next questions refer to the following.
Suppose the yen-pound exchange rate is currently £1 = ¥300. A Japanese bank borrows £2 million from UK lenders for 1 year at 6% interest, and lends ¥600 million to Japanese borrowers for 1 year at 8% interest.
-This strategy will fail to yield the bank a profit if
A) the UK inflation rate exceeds 2% during the year
B) Japan experiences deflation of 2% or more
C) the pound appreciates by 2%
D) the yen appreciates by 2% or more
E) short term interest rates in the UK rise above 8%

Question

Quizplus · Accepted Answer

The Answer of The next questions refer to the following.
Suppose the yen-pound exchange rate is currently £1 = ¥300. A Japanese bank borrows £2 million from UK lenders for 1 year at 6% interest, and lends ¥600 million to Japanese borrowers for 1 year at 8% interest.
-This strategy will fail to yield the bank a profit if
A) the UK inflation rate exceeds 2% during the year
B) Japan experiences deflation of 2% or more
C) the pound appreciates by 2%
D) the yen appreciates by 2% or more
E) short term interest rates in the UK rise above 8%

The Next Questions Refer to the Following