Assume You Manage a Firm That Faces Transaction Exposure

question 29

Multiple Choice

Assume you manage a firm that faces transaction exposure. Your company manufactures and sells automobile parts around the world. You have just completed a large sale of parts to an auto manufacturer in France and received a promised payment of €172 per part. You have already sold 17,000 parts and are now awaiting payment. The exchange rate today is $1.25/€. Over the next ninety days, the direct exchange rate unexpectedly moves from $1.25/€ to $1.30/€. What is the gain in domestic revenue due to this unexpected move in the exchange rate?

• A) $106,000
• B) $114,900
• C) $118,500
• D) $146,200