Question
SiamCement, theBangkok-based cementmanufacturer, suffered enormous losses with the coming of the Asian crisis in 1997. The company had been pursuing a very aggressive growth strategy
SiamCement, theBangkok-based cementmanufacturer, suffered enormous losses with the coming of the Asian crisis in 1997. The company had been pursuing a very aggressive growth strategy in themid-1990s, taking on massive quantities offoreign-currency-denominated debt(primarily U.S.dollars). When the Thai baht(B) was devalued from its pegged rate of B24.5/$ in July1997, Siam's interest payments alone were over$900 million on its outstanding dollar debt(with an average interest rate of 8.92% on its U.S. dollar debt at thattime). Assuming Siam Cement took out $50 million in debt in June 1997 at 8.92% interest, and had to repay it in one year when the spot exchange rate had stabilized at B41.6/$, what was the foreign exchange loss incurred on thetransaction?
Find: The amount of the foreign exchange loss incurred on the transaction is B
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