XYZ Corp has a calendar year end. On January 1, 20x0, the company borrowed 5,000,000 Foreign Currency Units (FCU's) from a foreign bank. The loan is to be repaid on December 31, 20x3 and requires interest at 5% to be paid every December 31. The loan and applicable interest are both to be repaid in pesos. XYZ does not hedge to minimize its foreign exchange risk. The following rates were in effect throughout the term of the loan:

 

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January 1, 20x0 December 31, 20x0 December 31, 20x1 December 31, 20x2 December 31, 20x3 FCU 1 = P1.1500 FCU 1 = P1.1490 FCU 1 = P1.1485 FCU 1 = P1.1483 FCU 1 = P1.1487 The average rates in effect for 20x0 and 20x1 were as follows: Year 20x0 FCU 1 = P1.1493 Year 20x1 FCU 1 = P1.1487 What amount would XYZ record its initial loan liability on January 1, 20x0? What is the amount of interest paid during 20x0? What is the amount of interest paid during 20x1? January 1, 20x0 December 31, 20x0 December 31, 20x1 December 31, 20x2 December 31, 20x3 FCU 1 = P1.1500 FCU 1 = P1.1490 FCU 1 = P1.1485 FCU 1 = P1.1483 FCU 1 = P1.1487 The average rates in effect for 20x0 and 20x1 were as follows: Year 20x0 FCU 1 = P1.1493 Year 20x1 FCU 1 = P1.1487 What amount would XYZ record its initial loan liability on January 1, 20x0? What is the amount of interest paid during 20x0? What is the amount of interest paid during 20x1?

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To calculate the initial loan liability on January 1 20x0 we need to convert the borrowed amount of ... View the full answer