If a firm's balance sheet has an equal amount of exposed foreign currency assets and liabilities and the firm translates by the temporal method, then
A) the net exposed position is called monetary balance.
B) the change of value of liabilities and assets due to a change in exchange rates will be of equal but opposite direction.
C) both A and B are true.
D) none of the above.

Question

Quizplus · Accepted Answer

When a firm uses the temporal method and has equal foreign currency assets and liabilities, the net exposed position is indeed called a monetary balance, and any changes in exchange rates will affect the value of assets and liabilities equally but in opposite directions, thus both A and B are true.

If a Firm's Balance Sheet Has an Equal Amount of Exposed