Explanation:
Calculate the net long position in BRL:
$69,000 (net long)Since the bank is net long BRL, a depreciation of BRL results in a loss:
$69,000 × (-0.03) = -R$2,070$2,070 / 3.497 = -$591.94 ≈ -$592The answer is b) Loss of $592.
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Q-501.2. A bank has the following currency positions in the Brazilian real, expressed in Brazilian real (R$):
$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
Loss of $3,365
B
Loss of $592
C
Gain of $1,270
D
Gain of $4,822
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