Assume that the euro and Swiss franc are highly correlated. A UK firm anticipates the equivalent of £1 million cash outflows in francs and the equivalent of £1 million cash outflows in euros. During a ____ cycle, the firm is ____ affected by its exposure.

Question

Quizplus · Accepted Answer

When the pound is strong, the UK firm benefits because it will need fewer pounds to meet its euro and franc obligations, thus being favourably affected by its exposure.

Assume That the Euro and Swiss Franc Are Highly Correlated