Suppose That the G Company Knows That in One Month

question 24

Multiple Choice

Suppose that the G Company knows that in one month it must pay £7 million for goods that its U.S. subsidiary will receive in Britain. The current exchange rate is $1.99£. The risk that the corporate treasurer faces is that

• A)the $US/pound exchange rate falls in a month's time (i.e., the pound weakens).
• B)the $US/pound exchange rate rises in a month's time (i.e., the pound strengthens).
• C)the $US/pound exchange rate does not change from its current position.
• D)the pound exchange rate falls in a month's time (i.e., the pound strengthens).

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Definitions:

Innovation

The process of introducing new ideas, devices, or methods, often leading to technological progress or improved solutions.

Invention

The creation of a new product, service, or process, often one that has never been made before, resulting from study and experimentation.

Diffusion

Diffusion in social sciences refers to the process by which an innovation is communicated through certain channels over time among the members of a social system.

Entrepreneurs

Individuals who create, organize, and manage a business venture, taking on financial risk to do so.