Six months ago, Qualitybank, LTD., issued a $100 million, one-year maturity CD denominated in euros. On the
Question:
Six months ago, Qualitybank, LTD., issued a $100 million, one-year maturity CD denominated in euros. On the same date, $60 million was invested in a -denominated loan and $40 million was invested in a U.S. Treasury bill. The exchange rate on this date was 1.7382/$. Assume no repayment of principal and an exchange rate today of 1.3905/$.
a. What is the current value of the CD principal (in dollars and euros)?
b. What is the current value of the euro-denominated loan principal (in dol- lars and euros)?
c. What is the current value of the U.S. Treasury bill (in dollars and euros)?
d. What is Qualitybank's profit/loss from this transaction (in dollars and euros)?
Step by Step Answer:
Financial Institutions Management A Risk Management Approach
ISBN: 9780077211332
6th Edition
Authors: Anthony Saunders, Marcia Cornett