Which of the Following Illustrates Non-Contractual Exchange-Rate Risk

question 8

Multiple Choice

Which of the following illustrates non-contractual exchange-rate risk?

• A)A Canadian importer will owe £50,000 and the pound is expected to appreciate.
• B)A French airplane manufacturer has suppliers in Canada and the exchange rate has been unstable.
• C)A Canadian distributor of Japanese electronic goods expects the Dollar to depreciate.
• D)A Canadian subsidiary of a German manufacturer transfers DM100,000 to the parent annually.

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Definitions:

Rubber Division

A business segment or department within a company that is responsible for the production and/or sales of rubber products.

Common Corporate Fixed Costs

Expenses incurred by a corporation that do not vary with the level of production or sales, and are shared across different segments or products of the company.

Contribution Margin

The difference between sales revenue and variable costs, which contributes to covering fixed costs and generating profit.

Fixed Costs

Costs that do not change with the level of output or activity, such as rent or salaries.