Suppose that Commerce Bank in Poland holds $ 400 in assets and $ 1,000 in liabilities denominated in dollars. The home currency is the zloty, and the current spot exchange rate is $ 1 = 145 zlotys.
a. What is the bank's net exposure in dollars?
b. Will the bank gain or lose if the spot exchange rate changes to $ 1 = 150 zlotys? Calculate the gain or loss.
c. Will the bank gain or lose if the spot exchange rate changes to $ 1 = 140 zlotys? Calculate the gain or loss.