Which of the following is an example of economic exposure but not an example of transaction exposure?
A) An increase in the pound's value hurts a UK firm's domestic sales because foreign competitors are able to increase their sales to UK customers.
B) An increase in the dollar's value increases the UK firm's cost of US payables.
C) A decrease in the euro's value decreases a UK firm's pound value of euro receivables.
D) A decrease in the Swiss franc's value decreases the pound value of interest payments on a Swiss deposit sent to a UK firm by a Swiss bank.
Correct Answer:
Verified
Q7: It is generally least difficult to effectively
Q13: As opposed to transaction exposure, managing economic
Q13: All MNCs are subject to translation exposure.
Q14: Depreciation of the pound relative to the
Q15: An MNC expects to sell fixed assets
Q18: A limitation of hedging translation exposure is
Q19: Springfield plc, based in the UK, has
Q20: Although forward contracts may reduce translation exposure
Q23: U.S. firms can attempt to hedge their
Q33: _ exposure occurs when an MNC translates
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents