The Following Are the Net Currency Positions of a U

question 39

Multiple Choice

The following are the net currency positions of a U.S.FI (stated in U.S.dollars) .
Note: Net currency positions are foreign exchange bought minus foreign exchange sold restated in U.S.dollar terms.
$\begin{array}{l}\begin{array}{lll}\text {Currency}\\\text {Canaclian Dollay}\\\text {Euro}\\\text {Japane se Yen}\\\text {SWiss: Fiadc}\\\text {British Pound.}\\\end{array}\begin{array}{lll}\text {Net Position}\\\text {+U.S. \$ 1,200}\\\text {-U.S. \$ 245,900}\\\text {+U.S. \$ 505,000 }\\\text {-U.S. \$ 36,700}\\\text {+U.S. \$447,900}\\\end{array}\end{array}$
How would you characterize the FI's risk exposure to fluctuations in the Euro to dollar exchange rate?

• A)The FI is net short in the Euro and therefore faces the risk that the Euro will rise in value against the U.S.dollar.
• B)The FI is net short in the Euro and therefore faces the risk that the Euro will fall in value against the U.S.dollar.
• C)The FI is net long in the Euro and therefore faces the risk that the Euro will fall in value against the U.S.dollar.
• D)The FI is net long in the Euro and therefore faces the risk that the Euro will rise in value against the U.S.dollar.

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Definitions:

Consumer Surplus

The differentiation between what consumers are prepared to expend on a good or service and the sums they actually do.

Supply Curve

An illustrated chart that demonstrates how the supply quantity relates to a good's price.

Producer Surplus

The discrepancy between what sellers are prepared to accept for a commodity and the real payment they secure from selling it at the prevailing market price.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good that suppliers are willing to sell, typically upwards sloping.