Suppose that Commerce Bank in Poland holds $400 in assets and $1,000 in liabilities denominated in dollars. The home currency is the zloty, and the current spot exchange rate is $1 = 145 zlotys.
a. What is the bank’s net exposure in dollars?
b. Will the bank gain or lose if the spot exchange rate changes to $1 = 150 zlotys? Calculate the gain or loss.
c. Will the bank gain or lose if the spot exchange rate changes to $1 = 140 zlotys? Calculate the gain or loss.
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