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The Following Describes a Translation Exposure of Exchange Rate Risk

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The following describes a translation exposure of exchange rate risk. You sell custom-designed refrigerators in Canada. The refrigerators are manufactured in Mexico and it takes about 60 days from the time you agree to a sale and accept payment in Canada until you take delivery of the refrigerator and pay the Mexican firm. Your profit, therefore, is affected by changes in the dollar/peso exchange rate between the order and delivery dates.


Definitions:

Joint Venture

A partnership established for a specific project or for a limited time.

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