new to bookkeeping

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student2009
Posts: 2
Joined: Tue Aug 11, 2009 12:34 pm

new to bookkeeping

Post by student2009 » Tue Aug 11, 2009 2:29 pm

Hi my names blake and i just started a distance course in bookkeeping ( fns40207) and looking for qualified bookkeepers or students to help with some questions i might have. i have no expereince in accounting or anything financial for that matter and any help would be great. like for instance to do this question.

The Australian Dollar appears to be falling in value against the US Dollar. The
owner is well known at Bank of America in New York, where she maintains her
own personal Bank accounts.
She also has a credit facility from where she borrows large amounts of funds
($10million or more at a time) for use in Australia, for lending to the clients that
take out mortgages through the business that you work in.
The money that she borrows in America is lent to her at a special rate of 4.75%
per annum (American Rates). She has to maintain a monthly payment of interest
to the Bank based on these rates. The money is sent to America from Brisbane
through a local Bank.

1. What is the effect of the value of the Australian dollar falling in terms of value
against the US Dollar when determining the cost of funds borrowed from
America? Use the fact that value of the Australian Dollar has fallen by .25% in
terms of its value against the US Dollar.


to answer this question will i need to use foreighn currency rates? (usd and aud) ?
this is how i managed to work it out. i hope its correct




1usd = 0.75aud (hyperfetically)

using the amount of 10 million as the amount borrowed

1000000 x 4.75%
= $14,750,000 usd is the amount to be paid back.

so then i did
1000000x 0.75


=7500,000 is the amount in aud borrowed.


so coming back to the original question "What is the effect of the value of the Australian dollar falling in terms of value against the US Dollar when determining the cost of funds borrowed from
America?" - having the australian dollar fall in terms of value to the usd, will result in the business having to raise its interest rates on a monthly basis, if it was falling, to pay back the loan from the united states bank and also make a profit :?:

any input would be greatly appreciated ;)

Alex
Posts: 11
Joined: Sat Jun 13, 2009 12:34 am

Re: new to bookkeeping

Post by Alex » Wed Aug 12, 2009 6:57 pm

I think you can not use foreign currency rate as there is no dates provided. The effect of the value of the Australian dollar falling in terms of value
against the US Dollar is that she has to pay more by 0.25% because she borrows money in US dollars.
:)

student2009
Posts: 2
Joined: Tue Aug 11, 2009 12:34 pm

Re: new to bookkeeping

Post by student2009 » Thu Aug 13, 2009 4:55 pm

would it be fair to say that the interest borrowed instead of 4.75, is simply 5%? considering the aud is 25% less that of the usd? when determining the cost of the funds borrowed

chrischris626
Posts: 8
Joined: Wed Sep 09, 2009 9:25 pm

Re: new to bookkeeping

Post by chrischris626 » Wed Sep 09, 2009 9:41 pm

You do not need to change interest rate, on the day interest payable you use exchange rates, so it will be 25% more in aus dollars
1000000 x 4.75%
= $14,750,000 usd = $47500*1.25=59375
;)

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