Ay 4 You are the vice-president of finance for Exploratory Resources, headquartered in Calgary. In January 2012, your firm's Americansubsidiary obtained a six-month loan of $1.6 million (U.S.) from a bank in Calgary to finance the acquisition of an oll-producing propertyIn Oklahoma. The loan will also be repaid in U.S. dollars. At the time of the loan, the spot exchange rate was US$1.0131/CS and the U.S.currency was selling at a premium in the forward market. The June 2012 futures contract (face value = $160,000 per contract) wasquoted at US$1.0113.a. This part of the question is not part of your Connect assignment.b. How much is the bank expected to lose/gain due to foreign exchange risk? (Round the intermediate calculation to 4 decimalplaces.)Bank expected toc. This part of thegain(Click to select)gainloseVI$Canadianart of your Connect assignment.

6 - month Loan = $ 1,600,000 Repayment of loan = US dollars Spot Exchange Rate = US $ 1.0131/C$…

Answered: You are the vice-president of finance…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter27: Multinational Financial Management

Section: Chapter Questions

Problem 9P

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3 On April 1, 2007, Shannon, a US bank, made a one year loan (asset to Shannon) of 200,000 swiss francs to Scott Co. The dollar value of the loan at various dates was as follows: April 1, 2007: $100,000. December 31, 2007: $ 115,000 April 30, 2007: $110,000 April 1, 2008 : $ 97,000 A What amount of foreign exchange gain or loss should be recorded in April 2007 for Shannon B What amount of foreign exchange gain or loss should be recorded in full year 2007 for Shannon C What amount of foreign exchange gain or loss should be included in Shannon’s 2008 income statement.
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IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed 1500 million payable in three months. Currently, the spot exchange rate is v110/S and the three-month forward rate is ¥100/S. The three-month money market interest rate is 12 percent per annum in the United States and 9 percent per annum in Japan. The management of IBM decided to use a money market hedge to deal with this yen account payable Explain the process of a money market hedge and compute the dollar cost of meeting the yen obligation b. Conduct a cash flow analysis of the money market hedge a.
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