A US Firm Sells Merchandise Today to a British Company for for £150,000

question 41

Multiple Choice

A U.S. firm sells merchandise today to a British company for £150,000. The current exchange rate is $1.55/£, the account is payable in three months, and the firm chooses to avoid any hedging techniques designed to reduce or eliminate the risk of changes in the exchange rate. The U.S. firm is at risk today of a loss if:

• A) the exchange rate changes to $1.52/£.
• B) the exchange rate changes to $1.58/£.
• C) the exchange rate doesn't change.
• D) all of the above

---

Definitions:

South Korea

A country in East Asia, known for its rapid economic development, technological advancements, and vibrant culture, located on the southern half of the Korean Peninsula.

Industrialization

The process by which an economy is transformed from primarily agricultural to one based on the manufacturing of goods.

Chicago School

An economic theory advocating for free-market capitalism, emphasizing minimal government intervention.

Urban Life

Aspects and characteristics of living in densely populated, highly developed areas known as cities or towns.