Assume Jelly Corporation, a U.S.-based MNC, obtains a one-year loan of 1,500,000 Malaysian ringgit (MYR) at a nominal interest rate of 7%. At the time the loan is extended, the spot rate of the ringgit is $.25. If the spot rate of the ringgit in one year is $.28, the dollar amount initially obtained from the loan is $____, and $____ are needed to repay the loan.
A) 375,000; 449,400
B) 449,400; 375,000
C) 6,000,000; 5,357,143
D) 5,357,143; 6,000,000

Question

Quizplus · Accepted Answer

The dollar amount initially obtained from the loan is 1,500,000 MYR * $0.25 = $375,000. The amount needed to repay the loan is 1,500,000 MYR * 1.07 (to account for interest) * $0.28 = $449,400.