Finance

A bank buys a 6 month $1million Eurodollar deposit with a 6.5%. It invests the funds in a 6 month Swedish krona bond paying 7.5%. The spot rate is $0.18/krona.

The 6 month forward rate is 0.181/krona. What is the net spread earned on this investment if the bank hedges its exposure using the forward market?

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