Rockington ltd. is a UK manufacturing firm that produces goods in the UK and sells all products to retail stores in the US; the goods are denominated in dollars. It finances a small portion of its business with dollar-denominated loans from US banks. Which of the following is true? (Assume that the amount of products to be sold is guaranteed by contracts.)
A) The pound value of sales is higher if the dollar depreciates against the pound.
B) The pound value of sales is unaffected by the dollar's exchange rate.
C) A and B
D) None of the above
Correct Answer:
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