Assume that Atlanta Co. is producing motorcycles and selling them to U.S. customers. Atlanta Co. obtains all of its supplies from American firms and has no competition in the U.S. It has one major competitor in Japan. Now assume that Phoenix Co. is producing office furniture and obtains its supplies from a Canadian firm. Based on this information, Atlanta Co. has ____ exposure and Phoenix Co. has ____ exposure.

Question

Quizplus · Accepted Answer

Atlanta Co. has economic exposure because it faces the risk of changes in exchange rates affecting the demand for its motorcycles, due to competition from its Japanese competitor. Phoenix Co. has transaction exposure because it is exposed to the risk of changes in exchange rates affecting the cost of its supplies from the Canadian firm. There is no indication of translation exposure in either case.

Assume That Atlanta Co