An FI Has a 1-Year 8-Percent US$160 Million Loan Financed

Multiple Choice

An FI has a 1-year 8-percent US$160 million loan financed with a 1-year 7-percent UK£100 million CD. The current exchange rate is $1.60/£. 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 previous questions.

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.