A U.S. firm sells merchandise today to a British company for £100,000. The current exchange rate is $2.03/£ , the account is payable in three months, and the firm chooses to avoid any heding techniques designed to reduce or eliminate the risk of changes in the exchange rate. If the exchange rate changes to $2.05/£ the U.S. firm will realize a ________ of ________.
A) loss; $2000
B) gain; $2000
C) loss; £2000
D) gain; £2000
Correct Answer:
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Q1: _ exposure deals with cash flows that
Q2: Hedging, or reducing risk, is the same
Q3: A U.S. firm sells merchandise today to
Q3: Each of the following is another name
Q4: _ is a technique used by MNEs
Q10: A U.S. firm sells merchandise today to
Q12: Assuming no transaction costs (i.e., hedging is
Q18: Losses from _ exposure generally reduce taxable
Q19: The key arguments in opposition to currency
Q20: Losses from _ exposure generally reduce taxable
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