Answer:
Expected Profit of $21,000.
Explanation:
Kurnick Co. Initial amount borrowed = 1,000,000 pounds
Kurnick Co. converts the amount to dollars = 1,000,000 * 1.70 = $1,700,000.
Invests in 5% risk-free deposit.
Total dollar amount at the end of 1 year = $1,700,000 x 1.05 = $1,785,000.
Total amount owed on the pounds borrowed = 1,000,000*1.05 = 1,050,000 pounds.
Expected amount of dollars needed to repay the loan = 1,050,000 x 1.68 = $1,764,000.
Profit = $1,785,000 - $1,764,000 = $21,000.
