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Exchange Gains and Losses

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You are the vice president of International InfoXchange, headquartered in Chicago. All shareholders of the firm live in the United States. Earlier this month, you obtained a loan of 5 million Canadian dollars from a bank in Toronto to finance the construction of a new plan in Montreal. A the time the loan was received, the exchange rate was 75 U.S. cents to the Canadian dollar. By the end of the month, it has unexpectedly dropped to 70 cents. Has your company made a gain or loss as a result, and by how much?

Answer in text book is gain of $250,000. Please show the work.

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Solution Summary

The solution explains how to calculate the gain/loss due to changes in exchange rate

Solution Preview

Since the shareholders are in United States, the loan value in US dollars is which matters to them.
The loan amount ...

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