How much is the bank expected to lose or gain

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Case Study: You are the vice-president of finance for Exploratory Resources, headquartered in Calgary. In January 2012, your firm's American subsidiary obtained a six-month loan of $1.8 million (U.S.) from a bank in Calgary to finance the acquisition of an oil-producing property in Oklahoma. The loan will also be repaid in U.S. dollars. At the time of the loan, the spot exchange rate was US$1.0133/C$ and the U.S. currency was selling at a premium in the forward market. The June 2012 futures contract (face value = $180,000 per contract) was quoted at US$1.0115.

Question a. This part of the question is not part of your Connect assignment.

Question b. How much is the bank expected to lose/gain due to foreign exchange risk?

Reference no: EM133504618

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