On April 15, with the Canadian Dollar (CAN) Trading at $1.016

question 38

Multiple Choice

On April 15, with the Canadian dollar (CAN) trading at $1.016 to one US dollar (USD) , Lethbridge Saddlery Ltd. took delivery of $250,000(USD) worth of saddles and tack from a Montana supplier which Lethbridge paid through an operating loan at 5% in US currency. Lethbridge planned to repay the loan out of sales revenue 90 days later. If the exchange rate went to $0.980 CAN to one USD when the loan matured, how much did Lethbridge Saddlery Ltd. pay in interest in Canadian dollars?

• A) $3,034
• B) $3,131
• C) $3,020
• D) $12,303
• E) $12,700

---

Definitions:

Spot Rate

The present market rate at which a specific currency is available for purchase or sale for on-the-spot delivery.

Foreign Currency

Currency used in a country other than one's own, involved in international transactions or investments.

Forward Contract

An agreement to buy or sell an asset at a specified future date for a price that is agreed upon today.

Exchange Rates

The value of one currency for the purpose of conversion to another, which fluctuates based on market conditions and economic factors.