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A bank issued $200 million worth of one-year CD liabilities in Brazilian reals at a rate of 6.5%. The original spot exchange rate of US
- A bank issued $200 million worth of one-year CD liabilities in Brazilian reals at a rate of 6.5%. The original spot exchange rate of US dollar for Brazilian reals at the time of the transaction was $0.305/Br.
- Is this bank exposed to a risk of the Brazilian real appreciating or depreciating relative to the US dollar?
- Is this bank exposed to a risk of the US dollar appreciating or depreciating relative to the Brazilian real?
- What will be the US dollar cost rate on this CD if the US dollar depreciates relative to the Brazilian real such that the exchange rate at the end of the year is $0.325/Br?
- What will be the US dollar cost rate on this CD if the US dollar appreciates relative to the Brazilian real such that the exchange rate at the end of the year is $0.285/Br?
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Financial Management
Authors: P V V Satyanarayana
1st Edition
9350568012, 9789350568019
