The Following Information Pertains to Questions

question 29

Multiple Choice

The following information pertains to questions
XYZ Corp has a calendar year end.On January 1,2010,the company borrowed $5,000,000 U.S.dollars from an American Bank.The loan is to be repaid on December 31,2013 and requires interest at 5% to be paid every December 31.The loan and applicable interest are both to be repaid in U.S.dollars.XYZ does not hedge to minimize its foreign exchange risk.
The following exchange rates were in effect throughout the term of the loan: The average rates in effect for 2010 and 2011 were as follows:
-What is the amount of interest expense (in Canadian Dollars) recorded for 2010?

• A)$250,000
• B)$372,500
• C)$287,325
• D)$287,250

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Definitions:

Economic Profits

The difference between the total revenue earned by a firm and the total costs of production, including opportunity costs.

Market Demand Curve

A graphical representation showing the total demand of all consumers in a market for a particular product at different prices.

Colluded

A situation where firms in a market agree to set prices or output levels to maximize collective profits, often at the expense of competition.

Marginal Cost

The financial implication of creating an extra unit of a product or service.