14-74 If the Exchange Rate Had Fallen from $1

question 32

Multiple Choice

14-74 If the exchange rate had fallen from $1.60/£1 at the beginning of the year to $1.50/£1 at the end of the year when the FI needed to repatriate the principal and interest on the loan.What would the dollar loan revenues at the end of the year be as a return on the original dollar investment?

• A)13%.
• B)12.55%.
• C)16%.
• D)8.75%.
• E)7.25%.

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Definitions:

Principals

Fundamental truths or propositions that serve as the foundation for a system of belief or behavior or for a chain of reasoning.

Agents

Individuals or companies authorized to act on behalf of another person or company in commercial transactions.

Payment Default

The failure to make a required payment on a loan or other debt obligation by the due date.

Loan Covenants

Agreements between a borrower and a lender that the borrower must comply with to remain in good standing.