in order to hedge its future raw material purchases for its operations, in Poland, a U.S....

 

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in order to hedge its future raw material purchases for its operations, in Poland, a U.S. manufacturing firm (U.S. counterparty) agrees to enter into a currency swap with a Polish multinational firm (foreign counterparty) whereby the U.S. counterparty agrees to provide the following quarterly notional amounts in US dollars to the foreign counterparty in exchange for the following quarterly notional amounts in Polish zlotys. Quarter End U.S. Counterparty Receives Foreign Counterparty Receives 1,500,000 zloty 900,000 zloty 1 2 3 4 750,000 zioty 1,800,000 zloty 500,000 USD 300,000 USD 250,000 USD 600,000 USD Assume that the exchange rates are 3.25 zoty/1.0 USD and 2.85 zlaty/1.0 USD at the end of quarter 1 and quarter 2, respectively. Required: Calculate the U.S. manufacturing firm's foreign currency gain or loss recorded at the end of the first and second quarters on the currency swap. in order to hedge its future raw material purchases for its operations, in Poland, a U.S. manufacturing firm (U.S. counterparty) agrees to enter into a currency swap with a Polish multinational firm (foreign counterparty) whereby the U.S. counterparty agrees to provide the following quarterly notional amounts in US dollars to the foreign counterparty in exchange for the following quarterly notional amounts in Polish zlotys. Quarter End U.S. Counterparty Receives Foreign Counterparty Receives 1,500,000 zloty 900,000 zloty 1 2 3 4 750,000 zioty 1,800,000 zloty 500,000 USD 300,000 USD 250,000 USD 600,000 USD Assume that the exchange rates are 3.25 zoty/1.0 USD and 2.85 zlaty/1.0 USD at the end of quarter 1 and quarter 2, respectively. Required: Calculate the U.S. manufacturing firm's foreign currency gain or loss recorded at the end of the first and second quarters on the currency swap.

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