Orbital Communications has operating plants in over 100 countries. It also keeps funds for transaction purposes in many foreign countries. Assume that in 2010 it held 100,000 kroner in Norway worth $35,000. The funds drew 12 percent interest, and the krone increased 6 percent against the dollar.



What was the value of the holdings based on U.S. dollars, at year-end?

To determine the value of the holdings in US dollars at year-end, we need to consider the interest earned and the change in exchange rates.

First, let's calculate the interest earned on the 100,000 kroner. The funds drew 12 percent interest, which means it earned an additional 12,000 kroner ($35,000 x 12%). So, the total value of the funds at year-end, in kroner, would be 112,000 kroner ($100,000 + 12,000 kroner).

Next, let's calculate the change in exchange rates. The krone increased 6 percent against the dollar. To find out the new exchange rate, we multiply the initial exchange rate by the percentage increase:

New exchange rate = Initial exchange rate + (Initial exchange rate x Change in exchange rate)
= $35,000 + ($35,000 x 6%)
= $35,000 + $2,100
= $37,100

Finally, to find the value of the holdings in US dollars at year-end, we convert the total value of funds in kroner to US dollars using the new exchange rate:

Value in US dollars = Total value of funds in kroner x New exchange rate
= 112,000 kroner x $37,100/kroner
= $4,155,200

Therefore, the value of the holdings based on US dollars at year-end would be $4,155,200.