22-118 What Is the Net Gain or Loss on the Loan

question 95

Multiple Choice

22-118 What is the net gain or loss on the loan given that the exchange rates at the time of repayment were $1.63/£ in the cash market and 1.62/£ in the futures market? Assume that the futures position is opened and unwound as stated in questions 114 and 116.

• A)$2,120,000 loss.
• B)$1,330,000 loss.
• C)$2,670,000 loss.
• D)$1,330,000 gain.
• E)$2,670,000 gain.

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Definitions:

Wage Rate

The amount of money paid to an employee per unit of time, often per hour or year.

Marginal Product

The additional output produced by adding one more unit of a specific input, keeping all other inputs constant.

Perfectly Competitive

A market structure characterized by a large number of sellers and buyers, homogeneous products, and no barriers to entry or exit, leading to the optimal allocation of resources.

Marginal Cost

The additional cost incurred by producing one more unit of a product.