Question

The following are the foreign currency positions of an H. expressed in the foreign currency Currency Swiss franc (SE) British pound (£) Japanese yen (Y) Assets Sf 127,500 38,168 17,869,885 Liabilities Sf 51,000 £ 16,794 43, 147,954 FX Bought SE 10, 200 £ 11,450 Y1, 259, 181 EX Sold SE 15,300 £ 15,267 79, 233, 998 The exchange rate of dollars for Sfis 1.02, of dollars for British pound is 131, and of dollars for yen is 0.00953. The following are the foreign currency positions converted to dollars: Currency Swiss franc (SE) British pound (6) Japanese yen (Y) Assets $125,000 $ 50,000 $ 75,000 Liabilities EX Bought $50,000 $10,000 $22,001 $15,000 $30,000 $12,000 EX Sold $15,000 $20,000 $80,000 a. What is the Fi's net exposure in Swiss francs stated in Swiss francs (SI) and in dollars ($)? b. What is the Fi's net exposure in British pounds stated in British pounds () and in dollars ($)? c. What is the Fi's net exposure in Japanese yen stated in Japanese yen (W) and in dollars ($)? (Negative amounts by.o minus sign.) d. What is the expected loss or gain if the Sf exchange rate appreciates by 1 percent? e. What is the expected loss or gain if the exchange rate appreciates by 1 percent? (Round your answer to the ne amount. (e.g., 32)) f. What is the expected loss or gain if the exchange rate appreciates by 2 percent? (Negative amount should be i minus sign)

Answer 1

Solution of the above question is as under:

a) Net Exposure in Swiss Francs: $125000-$50000+$10000-$15000=$70000

b) Net Exposure in British Pound: $50000-$22001+$15000-$20000=$22999

c) Net Exposure in Japanese Yen: $75000-$30000+$12000-$88000= -$31000

d) If the Assets are greater than liabilities, then an appreciation of the foreign exchange rate will generate a Gain equals to $70000*0.01=$700

e) Expected Gain if the British Pound Exchange Rate appreciates by 1% is %22999*0.01=$229.99

f) Expected Loss if the Japanese Yen exchange Rate appreciates by 2% is -%31000*0.02=-$620