
Concept explainers
a)
To determine: Net exposure stated in Country S francs.
a)

Explanation of Solution
Given information:
An FI holds Country S francs of 134,394 foreign exchange assets and 53,758 in foreign exchange liabilities.
It has conducted foreign exchange trading and bought 10,752 and sold 16,127.
Calculation of net exposure in Sfs:
Hence, net exposure stated in Sfs is Sf75, 261
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)

Explanation of Solution
Given information:
An FI holds Country B pounds of 30,488 foreign exchange assets and 13,415 in foreign exchange liabilities.
It has conducted foreign exchange trading and bought £9,146 and sold £12,195
Calculation of net exposure in pounds:
Hence, net exposure stated in pounds is £14,024
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)

Explanation of Solution
Given information:
An FI holds Country J yens of 7,075,472 foreign exchange assets and 2,830,189 in foreign exchange liabilities.
It has conducted foreign exchange trading and bought ¥1,132,075 and sold ¥8,301,887
Calculation of net exposure in ¥:
Hence, net exposure stated in yen is -¥2,924,529
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)

Explanation of Solution
Calculation of gain or loss:
When assets are greater than liabilities, then there arises a gain.
Therefore, gain is SF7, 261 or $7,000
e)
To determine: Expected loss or gain when £ exchange rate appreciated by 1%.
e)

Explanation of Solution
Calculation of gain or loss:
When assets are greater than liabilities, then there arises a gain.
Therefore, gain is £140 or $230
f)
To determine: Expected loss or gain when ¥ exchange rate appreciated by 2%.
f)

Explanation of Solution
Calculation of gain or loss:
Therefore, gain is -¥58,491 or -$620
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Chapter 9 Solutions
Financial Markets and Institutions
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