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:

Property Plant

Long-term physical assets owned by a company, such as buildings and machinery, used in operations to generate revenue.

Intangible Assets

Non-physical assets owned by a business, such as patents, trademarks, and copyrights, that have economic value.

Office Equipment

Long-term assets used in an office for the business operations, such as computers, desks, and chairs.

Book Value

Book value is the net value of a company's assets as recorded on its financial statements, minus any liabilities.