Cheptor 13 Fareign Exchange Risk 421 Integrated Mini Case reign Exchange Risk Exposure that a U.S. FI has the following assets and 4. Suppose that instead of funding the $300 million ablitses investment in 8 percent British loans with US CDs, the Fl manager funds the British loans with $300 million equivalent one year pound CDs at a rate of 5 percent and that instead of funding the $200 million investment in 10 percent Turkish loans with US. CDs, the FI manager funds the Turkish loans with $200 million equivalent one Liabilities $1,000 mitlion US. CDs (one year In dollars us loans (one year) u.k. loans fone year) oens made in 5200 milion equivalent Turkish loans (one year) poans made in Turkish lira) year Turkish lira CDs at a rate of 6 percent. What will the FT's balance sheet look like after these changes have been made? 5. Using the information in part 4, calculate the return on the FI's loan portfolio, the average cost of funds, and the net return for the Fl if the pound spot foreign exchange rate falls to S1.45/1 and the lira spot foreign exchange rate Tbe promised one year US. CD rate is 4 percent, to he pald in dollars at the end of the year, the one year, in the United States; one year default risk-free loans 6. Using the information in part 4, calculate the ure yielding 8 percent in the United Kingdom; and return on the default risk-free loans are ylelding 6 percent falls to $0.52/TL over the year FI's loan portfolio, the average cost of funds, and the net return for the FI if cent in Turkey. The exchange rate of dollars for the pound spot foreign exchange rate rises to S1.70/1 and the lira spot foreign exchange rate ear default risk-free loans are yielding 10 per pounds at the beginning of the year is S16/E1, and the exchange rate of dollars for Turkish lira at the beginning of the year is s0.5533/TL falls to S0.58/TL over the year 7. Suppose that instead of funding the $300 mil lon investment in 8 percent British loans with Calculate the dollar proceeds from the F's loan CDs issued in the United Kingdom, the Fl man- portfolio at the end of the year, the return on ager hedges the foreign exchange risk on the the Fl's loan portfolio, and the net return for British loans by immediately selling its expected the FI if the spot foreign exchange rate has notone year pound loan proceeds in the forward FX market. The current forward one year exchange 2. Calculate the dollar proceeds from the FI's loanrate between dollars and pounds is s1.53/E changed over the year folio at the end of the year, the return on the port FT's loan portfolio, and the net return for the Fl Additionally, instead of funding the $200 mil lion investment in 10 percent Turkish loans with if the pound spot foreign exchange rate falls to CDs issued in the Turkey, the FI manager hedges 145/1 and the lira spot foreign exchange rate the foreign exchange risk on the Turkish loans by immediately selling its expected one year lira 3 Calculate the dollar proceeds from the FI's loan loan proceeds in the forward FX market. The cur falls to S0.52/TL over the year. portolio at the end of the year, the return on the rent forward one year exchange rate between FI's loan portfolio, and the net return for the FI dollars and Turkish lira is S0.5486/TL. Calcu f the pound spot foreign exchange rate rises to late the return on the FI's investment portfolio S1.70/1 and the lira spot foreign exchange rate (cluding the hedge) and the net return for the Fl over the year rises to $0.58/TL over the year Cheptor 13 Fareign Exchange Risk 421 Integrated Mini Case reign Exchange Risk Exposure that a U.S. FI has the following assets and 4. Suppose that instead of funding the $300 million ablitses investment in 8 percent British loans with US CDs, the Fl manager funds the British loans with $300 million equivalent one year pound CDs at a rate of 5 percent and that instead of funding the $200 million investment in 10 percent Turkish loans with US. CDs, the FI manager funds the Turkish loans with $200 million equivalent one Liabilities $1,000 mitlion US. CDs (one year In dollars us loans (one year) u.k. loans fone year) oens made in 5200 milion equivalent Turkish loans (one year) poans made in Turkish lira) year Turkish lira CDs at a rate of 6 percent. What will the FT's balance sheet look like after these changes have been made? 5. Using the information in part 4, calculate the return on the FI's loan portfolio, the average cost of funds, and the net return for the Fl if the pound spot foreign exchange rate falls to S1.45/1 and the lira spot foreign exchange rate Tbe promised one year US. CD rate is 4 percent, to he pald in dollars at the end of the year, the one year, in the United States; one year default risk-free loans 6. Using the information in part 4, calculate the ure yielding 8 percent in the United Kingdom; and return on the default risk-free loans are ylelding 6 percent falls to $0.52/TL over the year FI's loan portfolio, the average cost of funds, and the net return for the FI if cent in Turkey. The exchange rate of dollars for the pound spot foreign exchange rate rises to S1.70/1 and the lira spot foreign exchange rate ear default risk-free loans are yielding 10 per pounds at the beginning of the year is S16/E1, and the exchange rate of dollars for Turkish lira at the beginning of the year is s0.5533/TL falls to S0.58/TL over the year 7. Suppose that instead of funding the $300 mil lon investment in 8 percent British loans with Calculate the dollar proceeds from the F's loan CDs issued in the United Kingdom, the Fl man- portfolio at the end of the year, the return on ager hedges the foreign exchange risk on the the Fl's loan portfolio, and the net return for British loans by immediately selling its expected the FI if the spot foreign exchange rate has notone year pound loan proceeds in the forward FX market. The current forward one year exchange 2. Calculate the dollar proceeds from the FI's loanrate between dollars and pounds is s1.53/E changed over the year folio at the end of the year, the return on the port FT's loan portfolio, and the net return for the Fl Additionally, instead of funding the $200 mil lion investment in 10 percent Turkish loans with if the pound spot foreign exchange rate falls to CDs issued in the Turkey, the FI manager hedges 145/1 and the lira spot foreign exchange rate the foreign exchange risk on the Turkish loans by immediately selling its expected one year lira 3 Calculate the dollar proceeds from the FI's loan loan proceeds in the forward FX market. The cur falls to S0.52/TL over the year. portolio at the end of the year, the return on the rent forward one year exchange rate between FI's loan portfolio, and the net return for the FI dollars and Turkish lira is S0.5486/TL. Calcu f the pound spot foreign exchange rate rises to late the return on the FI's investment portfolio S1.70/1 and the lira spot foreign exchange rate (cluding the hedge) and the net return for the Fl over the year rises to $0.58/TL over the year