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Alpha Fund Incs latest financial statements showed that there is a major currency mismatch in its portfolio as follows: Assets Liabilities 50 million U.S. loans;

Alpha Fund Incs latest financial statements showed that there is a major currency mismatch in its portfolio as follows:

Assets

Liabilities

50 million U.S. loans; 1-year maturity in USD, yielding 8%.

100 million U.S. short-term loans; 1-year maturity in USD, yielding 6%

USD50 million equivalent Currency A loans; 1-year maturity made in Currency A, yielding 13%

A Assuming the FX position unhedged, and the spot FX rate has not changed over the 1-year period and remains at USD1.70/A, what transactions must the firm undertake to make the Currency A-denominated loan given in the financial statements? What is the weighted return on the firms assets and its net return? (You must show the transactions clearly)
B Suppose that at the end of the year, Currency A depreciated against USD and the exchange rate becomes USD1.55/A, recalculate the weighted return on the firms assets and its net return.

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