The Following Are the Net Currency Positions of a Canadian

question 86

Multiple Choice

The following are the net currency positions of a Canadian FI (stated in Canadian dollars) . How would you characterize the FI's risk exposure to fluctuations in the British pound to dollar exchange rate?

• A)The FI is net short in the British pound and therefore faces the risk that the British pound will rise in value against the U.S. dollar.
• B)The FI is net short in the British pound and therefore faces the risk that the British pound will fall in value against the U.S. dollar.
• C)The FI is net long in the British pound and therefore faces the risk that the British pound will fall in value against the U.S. dollar.
• D)The FI is net long in the British pound and therefore faces the risk that the British pound will rise in value against the U.S. dollar.
• E)The FI has a balanced position in the British pound.

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Definitions:

Public Accounting Firms

Professional services organizations that provide accounting, audit, tax, and consulting services to businesses and individuals.

Real Risk-free Rate

The rate of return on an investment with no risk of financial loss, adjusted for inflation.

Federal Reserve

The central banking system of the United States, responsible for implementing monetary policy, regulating banks, and ensuring financial stability.

Ownership Dilution

A reduction in an individual shareholder's ownership percentage due to the issuance of additional shares by the company.