You are the vice-president of finance for Exploratory Resources, headquartered in Calgary. In January 2012, your firm's American subsidiary obtained a six-month loan of $2.1 million (U.S.) from a bank in Calgary to finance the acquisition of an oil-producing property in Oklahoma. The loan will also be repaid in U.S. dollars. At the time of the loan, the spot exchange rate was US$1.0136/C$ and the U.S currency was selling at a premium in the forward market. The June 2012 futures contract (face value = $210,000 per contract) was quoted at US$1.0118. 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 decimal places.) Bank expected to gain $ 3780 Canadian c. This part of the question is not part of your Connect assignment.
You are the vice-president of finance for Exploratory Resources, headquartered in Calgary. In January 2012, your firm's American subsidiary obtained a six-month loan of $2.1 million (U.S.) from a bank in Calgary to finance the acquisition of an oil-producing property in Oklahoma. The loan will also be repaid in U.S. dollars. At the time of the loan, the spot exchange rate was US$1.0136/C$ and the U.S currency was selling at a premium in the forward market. The June 2012 futures contract (face value = $210,000 per contract) was quoted at US$1.0118. 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 decimal places.) Bank expected to gain $ 3780 Canadian c. This part of the question is not part of your Connect assignment.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:You are the vice-president of finance for Exploratory Resources, headquartered in Calgary. In January 2012, your firm's American
subsidiary obtained a six-month loan of $2.1 million (U.S.) from a bank in Calgary to finance the acquisition of an oil-producing property
in Oklahoma. The loan will also be repaid in U.S. dollars. At the time of the loan, the spot exchange rate was US$1.0136/C$ and the U.S.
currency was selling at a premium in the forward market. The June 2012 futures contract (face value = $210,000 per contract) was
quoted at US$1.0118.
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 decimal
places.)
Bank expected to gain
$ 3780
Canadian
c. This part of the question is not part of your Connect assignment.
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