22-125 What is the end-of-year profit or loss on the bank's cash position if in one year the exchange rate falls to US$0.765/C$1? Assume there is no change in interest rates.

Question

Quizplus · Accepted Answer

To calculate the end-of-year profit or loss, we need to convert the Canadian dollar balance to US dollars using the exchange rate at the end of the year:

C$1,000,000 x 0.765 = US$765,000

Since the beginning balance was US$770,000, the profit or loss is:

US$765,000 - US$770,000 = US$5,000 loss

22-125 What Is the End-Of-Year Profit or Loss on the Bank's