Suppose that the G Company knows that in one month it must pay ≤7 million for goods that its U.S.subsidiary will receive in Britain.The current exchange rate is $1.99/≤.The risk that the corporate treasurer faces is that:

Question

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If the $US/pound exchange rate rises in a month's time, i.e., the pound strengthens, then the G Company will have to pay more dollars to acquire the same amount of pounds, making the transaction more expensive. Therefore, the risk that the corporate treasurer faces is that the pound strengthens.

Suppose That the G Company Knows That in One Month