If the European Subsidiary of a U

question 38

Multiple Choice

If the European subsidiary of a U.S. firm has net exposed assets of €200,000, and the euro increases in value from $1.22/€ to $1.26/€ the U.S. firm has a translation:

• A) gain of $8,000.
• B) loss of $8,000.
• C) gain of $252,000.
• D) loss of €252,000.

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Definitions:

Economic Fundamentals

The core factors that influence the health and direction of an economy, including inflation, unemployment, and gross domestic product (GDP).

Financial Engineering

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The potential for losses due to fluctuations in financial markets, interest rates, foreign exchange rates, and credit risk.

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