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Answer: b) Loss of $592
**Correct answer: B) Loss of $592** First find the net long position in Brazilian reais: \[ (125{,}000 - 78{,}000) + (27{,}000 - 5{,}000) = 69{,}000 \text{ BRL} \] So the bank is **long BRL**. A long position loses value when the BRL depreciates. A 3.0% depreciation implies a loss of: \[ 69{,}000 \times 0.03 = 2{,}070 \text{ BRL} \] Convert that loss to USD using the spot rate 3.497 BRL per USD: \[ 2{,}070 / 3.497 = 591.94 \approx 592 \] Thus, the approximate loss is **$592**.
Author: Manit Arora
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Q-501.2. A bank has the following currency positions in the Brazilian real, expressed in Brazilian real ($R):
$125,000$78,000$27,000$5,000The spot exchange rate USD/BRL is R$3.497 (i.e., USD is the base currency). If the Brazilian real depreciates by 3.0%, approximately what is the gain (loss) on the currency position expressed in US dollars?
A
a) Loss of $3,365
B
b) Loss of $592
C
c) Gain of $1,270
D
d) Gain of $4,822
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