Solution-What is the maximum amount it can lose

What is the maximum amount it can lose

Reference no: EM13522426

You are the vice-president of finance for Exploratory Resources, headquartered in Houston, Texas. In January 2007, your firm's Canadian subsidiary obtained a six-month loan of 100,000 Canadian dollars from a bank in Houston to finance the acquisition of a titanium mine in Quebec province. The loan will also be repaid in Canadian dollars. At the time of the loan, the spot exchange rate was U.S. $0.8180/Canadian dollar and the Canadian currency was selling at a discount in the forward market. The June 2007 contract(Face value = $100,000 per contract) was quoted at U.S. $0.8120/Canadian dollar.

a. Explain how the Houston bank could lose on this transaction assuming no hedging.

b. If the bank does hedge with the forward contract, what is the maximum amount it can lose

Reference no: EM13522426

Questions Cloud

Kind of role in the the good life : "Happiness " plays some kind of role in the "the good life" for many phiosphers . Compare /contrast the view of happiness in TWO of the following 1)Aristotle 2) KAnt 3)Mill 4) Confucius?

Evaluate the contracts using a required rate of return : Suppose you are Hardy's agent and you wish to evaluate the two contracts using a required rate of return of 12 percent. In present value terms, how much better is the second contract?

Determine the age of the fossils : When any radioactive dating method is used, experimental error in the measurement of the sample's activity leads to error in the estimated age. find the age of the fossils

What is an ethically bad life : What is an ethically bad life? How do we know? How do humans differentiate between good and bad in the realm of ethics? Do ethical actions have value apart from the outcomes of those actions?

What is the maximum amount it can lose : Explain how the Houston bank could lose on this transaction assuming no hedging and if the bank does hedge with the forward contract, what is the maximum amount it can lose

Find the wavelength of light emitted by a hydrogen atom : Find the wavelength of light emitted by a hydrogen atom, when the electron moves from n = 7 quantum state to n = 5 quantum state

Explain the three stages of technological evolution : Explain the three stages of technological evolution, according to Ortega y Gasset's.

Evaluate the net present value of the project : Determine the net present value of the project. Ignore income taxes in this problem.) Janes, Inc., is considering the purchase of a machine that would cost $430,000 and would last for 6 years

Shared by most christian denominations : "What are the core beliefs that are shared by most Christian denominations? How important are the differences between the Christian denominations?"

User Account

All Pages

What is the maximum amount it can lose

Reference no: EM13522426

Reference no: EM13522426

Questions Cloud

Reviews

Write a Review

Cost Accounting Questions & Answers

Cost accounting assignment

Prepare the journal entries

Advise as to the liability of all the parties

Prepare revenues budget

Effect of exchange rate changes on cash and cash

Corporate governance

Cost-benefit analysis

Non-annual interest rates and annuities

Job costing in service organizations

Accounting for bad debt expense

Accounting and partnership problems

Development of relevant cash flows

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT