Assume that the British pound and Swiss franc are highly correlated. A U.S. firm anticipates the equivalent of $1 million cash outflows in francs and the equivalent of $1 million cash outflows in pounds. During a ____ cycle, the firm is ____ affected by its exposure.
A) strong dollar; favorably
B) weak dollar; not
C) strong dollar; not
D) weak dollar; favorably

Question

Quizplus · Accepted Answer

During a strong dollar cycle, the U.S. firm benefits because the dollar's strength means it can exchange fewer dollars for the same amount of foreign currency, reducing the cost of its cash outflows in francs and pounds.

Assume That the British Pound and Swiss Franc Are Highly