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

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.