Which One of the Following Is an Example of Long-Run

question 87

Multiple Choice

Which one of the following is an example of long-run exposure to exchange rate risk? Ignore all fees and transaction costs.

• A) A U.S. firm owns land in Mexico valued at three million pesos. That value has remained constant in Mexican pesos for the past year. However, the firm's financial statement reflects a three percent decrease in the value of that land for last year.
• B) A U.S. firm sells $250,000 worth of goods to Peru. However, when the payment for those goods arrives and the U.S. firm exchanges the foreign currency, it only receives $248,700.
• C) A U.S. firms purchases $120,000 worth of goods from Canada. However, by the time the goods arrive and the invoice is payable, the cost of those goods has increased to $120,400.
• D) A few years ago, a U.S. firm built a factory in Asia to take advantage of the lower labor costs. Today, the Asian labor costs have increased such that the Asian factory no longer provides a cost advantage over a U.S. factory.
• E) A. U.S. traveler withdrew an extra $2,000 in cash from her savings account to take with her as emergency funds when she traveled to Mexico. Before leaving on her trip, she exchanged this money into Mexican pesos. She never used any of this money during her vacation, so exchanged all of it back into U.S. dollars on her return and received $1,960.

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Definitions:

Goal Acceptance

Refers to the extent to which individuals agree with and commit to achieving specific goals set by themselves or by others such as managers or organizations.

Goal Acceptance

The degree to which individuals and groups agree with and commit to achieving specific goals.

Specific Goals

Well-defined, unambiguous, and measurable objectives that are to be achieved within a set timeframe.

Difficult Goals

Targets that are challenging and hard to achieve, often requiring extra effort and determination.