Question

Siam​ Cement, the​ Bangkok-based cement​ manufacturer, suffered enormous losses with the coming of the Asian crisis in 1997. The company had been pursuing a very aggressive growth strategy in the​ mid-1990s, taking on massive quantities of​ foreign-currency-denominated debt​ (primarily U.S.​ dollars). When the Thai baht​ (B) was devalued from its pegged rate of

B25.625.6​/$

in July​ 1997, Siam's interest payments alone were over​ $900 million on its outstanding dollar debt​ (with an average interest rate of

8.398.39​%

on its U.S. dollar debt at that​ time). Assuming Siam Cement took out

$ 46$46

million in debt in June 1997 at

8.398.39​%

​interest, and had to repay it in one year when the spot exchange rate had stabilized at

Upper B 42.5 divided by $B42.5/$​,

what was the foreign exchange loss incurred on the​ transaction?

Answer 1

the detailed answer of calculating foreign exchange loss is explained below