An FI has a 1-year 8-percent US $160 million loan financed with a 1-year 7-percent UK ≤100 million CD. The current exchange rate is $1.60/≤.
-What is the net gain or loss on the loan given that the exchange rates at the time of repayment were $1.63/≤ in the cash market and 1.62/≤ in the futures market? Assume that the futures position is opened and unwound as stated in previous question.
A) $2,120,000 loss.
B) $1,330,000 loss.
C) $2,670,000 loss.
D) $1,330,000 gain.
E) $2,670,000 gain.
Correct Answer:
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