A US Firm Holds an Asset in Great Britain and Faces

question 2

Multiple Choice

A U.S. firm holds an asset in Great Britain and faces the following scenario: where,
P^* = Pound sterling price of the asset held by the U.S. firm
P = Dollar price of the same asset
-The variance of the exchange rate is:

• A)0.0200
• B)0.10
• C)0.002
• D)none of the above

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Definitions:

Operating Cycle

The duration of time from the purchase of raw materials to the collection of receivables resulting from sales.