Question

Cemerlang Inc. is a conglomerate company which has four subsidiaries located in Brunei, Malaysia, United Kingdom, and Switzerland. The exchange rates available for the company are MYR2.9000/BND, GBP0.4000/BND and BND1.2500/CHF. The following is the intersubsidiary payments matrix for Cemerlang Inc in multiple currency.

RECEIVING SUBSIDIARY (in millions)	PAYING SUBSIDIARY (in million)
	Brunei	malaysia	UK	Switzerland
Brunei		MYR58	GBP10	CHF12.5
malaysia	BND10		GBP12	CHF16.25
UK	BND20	MYR29		CHF20
Switzerland	BND15	MYR43.5	GBP6

Perform multilateral netting by filling up the table below. If the transaction cost is 2%,
how much the company need to pay (in BND) if they decided to do multilateral
netting?

RECEIVING SUBSIDIARY (BND in million)	PAYING SUBSIDIARY (BND in million)
	Brunei	malaysia	UK	Switzerland	total receipt	total receipt/(payment)
Brunei
malaysia
UK
Switzerland
Brunei

Transaction cost in BND with multilateral netting:_____________________

Answer 1

Exchange rates are:

1 BND = MYR2.9000

1 BND = GBP0.4000

1 CHF = BND1.2500 , 1 BND = CHF .8000

RECEIVING SUBSIDIARY (BND in million)	PAYING SUBSIDIARY (BND in million)
Brunei	malaysia	UK	Switzerland	total receipt	total receipt/(payment)
Brunei		=MYR 58/2.900 = BND 20	=GBP10/.400 =BND 25	=CHF12.5/.800 =BND 15.625	BND 60.625	BND15.625
malaysia	BND10		=GBP12/.400 =BND30	=CHF16.25/.800 =BND20.3125	BND 60.3125	BND15.3125
UK	BND20	=MYR29/2.900 =BND10		=CHF20/.800 =BND25	BND 55	(BND15)
Switzerland	BND15	MYR43.5/2.900 =BND15	=GBP6/.400 =BND15		BND 45	(BND15.9375)
Brunei	BND45	BND45	BND70	BND60.9375

Transaction cost is 2% in BND

2 % of (45 + 45+ 70 +60.9375)

Total transaction cost =BND 4.41875