Prairie Dog Inc Assume That the Average Annual Exchange Rate Was Equal to an Annual

question 8

Essay

Prairie Dog Inc. borrowed US$10,000,000 on January 1, 2014 at an annual rate of 8%. The loan is due December 31, 2017 and interest is payable annually each December 31. The exchange rates on selected dates throughout the life of the loan are shown below: $$\begin{array} { | l | l | } \hline \text { January } 1,2014 & \text { CDN } \$ 1.4416 \\\hline \text { December } 31,2014 & \text { CDN } \$ 1.4325 \\\hline \text { December } 31,2015 & \text { CDN } \$ 1.4675 \\\hline \text { December } 31,2016 & \text { CDN } \$ 1.4436 \\\hline \text { December } 31,2017 & \text { CDN } \$ 1.4625 \\\hline\end{array}$$ Assume that the average annual exchange rate was equal to the December 31^st spot rates.
-Calculate the exchange gains or losses that would be reported in the net income of the company for each year over the life of the loan.

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Definitions:

Sex Hormones

Chemical substances produced by the body that regulate sexual development, behavior, and reproductive functions.

Hypothalamus

A region of the brain responsible for producing hormones that regulate vital bodily functions, including hunger, thirst, sleep, and various emotional responses.

Feedback Loop

A system in which glands regulate each other’s functioning through a series of hormonal messages.

Pituitary Gland

The pituitary gland is a small, pea-sized gland located at the base of the brain, important for controlling growth, metabolism, and the function of other glands in the endocrine system.