Final answer:
The bank's profit margin would be reduced if the Australian dollar depreciates against the British pound or if British interest rates increase, thus the correct answer is option e (both c and d).
Step-by-step explanation:
The bank in question is dealing with exchange rate risk by accepting deposits in Australian dollars (A$) and making fixed-rate loans in British pounds. If the A$ appreciates against the pound, this would improve the bank's profit margin, as it would need fewer A$ to pay back any pounds it had borrowed. However, if the A$ depreciates against the pound, the bank's profit margin would reduce, as it would need more A$ to service the same amount of pound-denominated debt. Therefore, option c would reduce the bank's profit margin.
Additionally, if British interest rates increase, the cost of borrowing pounds for the bank would also increase, which would further reduce the bank's profit margin if they have or plan to have pound-denominated liabilities. Therefore, option d is also correct, and hence option e (both c and d) is the answer that would reduce the bank's profit margin.