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On March 20, 2019, Stanford, LTD., issued a $100 million, one-year maturity CD denominated in Euros. On the same date, $60 million was invested in
On March 20, 2019, Stanford, LTD., issued a $100 million, one-year maturity CD denominated in Euros. On the same date, $60 million was invested in a Euro ()- denominated loan and $40 million was invested in a U.S. Treasury bill. The exchange rate on March 20, 2019 was 0.8795/$. Assume no repayment of principal, and the actual exchange rate on September 16, 2019 was 0.9026/$. The table below shows the balance sheets in Dollars and Euros for both March 20, 2019 and September 16, 2019 for Stanford, LTD. What was Stanford's gain or loss from its exposure to foreign currency risk? This problem is similar to problem 7-25 in your text. Exchange rates may be found at: http://www.oanda.com/currency/historical-rates/ Solution matrix for problem Euro Euro At Issue Date-3/20/2019: 0.8795/S Dollar Transaction Values (in millions) Euro Transaction values.(in millions) Euro Euro Loan S60 CD $100 Loan U.S T-bill $40 U.S. T-bill $100 $100 Today 9/16/2019: 0.9026/S Dollar Transaction Values (in millions) Euro Euro Loans CD** U.S. T-bills Transaction Values (in millions) Euro Euro Loan U.S. T-bill* CD Gain or Loss of Gain or Loss of
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