Mathematics · Financial Mathematics
A large Indian corporate raised 500 million USD through External Commercial Borrowings (ECB) in 2023 when the exchange rate was 80 INR/USD. The loan has a 5-year tenure with a 'Bullet Repayment' of the principal. The interest rate is SOFR (Secured Overnight Financing Rate) + 200 basis points. In 2025, the exchange rate moved to 85 INR/USD and the SOFR increased from 1% to 5% due to global monetary tightening. Calculate the 'Annual Interest Burden' in INR for the year 2025 and the 'Unrealized Exchange Loss' on the principal amount as of the 2025 valuation.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Interest Burden: 280.0 crore INR; Unrealized Loss: 250 crore INR.
- 2Interest Burden: 297.5 crore INR; Unrealized Loss: 500 crore INR.
- 3Interest Burden: 120.0 crore INR; Unrealized Loss: 250 crore INR.
- 4Interest Burden: 297.5 crore INR; Unrealized Loss: 250 crore INR.✓
Correct answer
Interest Burden: 297.5 crore INR; Unrealized Loss: 250 crore INR.
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