Concept explainers
a)
To determine: Net exposure stated in Country S francs.
a)
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Explanation of Solution
Given information:
An FI holds Country S francs of 127,500 foreign exchange assets and 51,000 in foreign exchange liabilities.
It has conducted foreign exchange trading and bought 10,200 and sold 15,300.
Calculation of net exposure in Sfs:
Hence, net exposure stated in Sfs is Sf71, 400
Calculation of net exposure in dollars:
Hence, net exposure stated in dollars is $70,000
b)
To determine: Net exposure stated in Country B pound.
b)
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Explanation of Solution
Given information:
An FI holds Country B pounds of 38,168 foreign exchange assets and 16,794 in foreign exchange liabilities.
It has conducted foreign exchange trading and bought £11,450 and sold £15,267
Calculation of net exposure in pounds:
Hence, net exposure stated in pounds is £17,557
Calculation of net exposure in dollars:
Hence, net exposure stated in dollars is $22,999
c)
To determine: Net exposure stated in Country J yen.
c)
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Explanation of Solution
Given information:
An FI holds Country J yens of 7,869,885 foreign exchange assets and 3,147,954 in foreign exchange liabilities.
It has conducted foreign exchange trading and bought ¥1,259,181 and sold ¥9,233,998
Calculation of net exposure in ¥:
Hence, net exposure stated in yen is -¥3,252,886
Calculation of net exposure in dollars:
Hence, net exposure stated in dollars is -$31,000
d)
To determine: Expected loss or gain when Sf exchange rate appreciated by 1%.
d)
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Explanation of Solution
Calculation of gain or loss:
When assets are greater than liabilities, then there arises a gain.
Therefore, gain is SF7, 400 or $7,000
e)
To determine: Expected loss or gain when £ exchange rate appreciated by 1%.
e)
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Explanation of Solution
Calculation of gain or loss:
When assets are greater than liabilities, then there arises a gain.
Therefore, gain is £176 or $230
f)
To determine: Expected loss or gain when ¥ exchange rate appreciated by 2%.
f)
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Explanation of Solution
Calculation of gain or loss:
Therefore, gain is -¥65,058 or -$620
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Chapter 9 Solutions
FINANCIAL MARKETS+INSTITUTIONS ACCESS
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