Question

A Spanish commercial bank is engaged in the following foreign lending/borrowing and trading activities in U.S dollar:

a) The bank owns $5,000,000 value of corporate bonds in U.S Company

b) The bank has lent an U.S. company an amount of $16,000,000

c) The bank has borrowed $8,000,000 from a American bank

d) The bank has sold $300,000 to a Spanish customer to facilitate acquisition of raw materials from U.S supplier.

e) The bank has purchased $4,000,000 from Spanish investor who received dividends on stockholding in corporation in U.S.A.

Based on information above:

a.Find the net foreign exchange exposure of the bank.

b. Does the bank have long or short position in U.S Dollar?