Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Siam Cement. Siam Cement, the Bangkok-based cement manufacturer, suffered enormous losses with the coming of the Asian crisis in 1997. The company had been pursuing
Siam Cement. Siam Cement, the Bangkok-based cement manufacturer, suffered enormous losses with the coming of the Asian crisis in 1997. The company had been pursuing a very aggressive growth strategy in the mid-1990s, taking on massive quantities of foreign-currency-denominated debt (primarily U.S. dollars). When the Thai baht (B) was devalued from its pegged rate of B24.2/$ in July 1997, Siam's interest payments alone were over $900 million on its outstanding dollar debt (with an average interest rate of 8.59% on its U.S. dollar debt at that time). Assuming Siam Cement took out $51 million in debt in June 1997 at 8.59% interest, and had to repay it in one year when the spot exchange rate had stabilized at B41.275, what was the foreign exchange loss incurred on the transaction? The amount of the foreign exchange loss incurred on the transaction is B. (Round to the nearest whole number.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started