Assume You Manage a Firm That Faces Transaction Exposure

question 21

Multiple Choice

Assume you manage a firm that faces transaction exposure. Your company manufactures and sells tricycles around the world. You have just completed a large sale of tricycles to a chain of stores in Sweden and received a promised payment of 375 krona per tricycle. You have already sold 3,000 tricycles and are now awaiting payment. The exchange rate today is 7.5 krona per dollar. Over the next ninety days, the indirect exchange rate unexpectedly moves from 7.5 to 7.7. What is the fall in domestic revenue due to this unexpected move in the exchange rate?

• A) $389
• B) $1289
• C) $2896
• D) $3896

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Definitions:

Type A Personality

A characteristic where an individual exhibits intense competitiveness, self-driven stress, and an ongoing feeling of haste.

External Locus

External Locus refers to an external locus of control, where individuals believe that their lives are controlled by external factors rather than their own actions.

Biofeedback

A technique that trains individuals to improve their health by controlling certain bodily processes that normally happen involuntarily, such as heart rate and blood pressure.

Immune Activity

Immune Activity involves the actions and responses of the body's immune system in identifying and eliminating pathogens and other foreign substances.