A British Firm and a U

question 38

Multiple Choice

A British firm and a U.S. Corporation each wish to enter into a currency swap hedging agreement. The British firm is receiving U.S. dollars from sales in the U.S. but wants pounds. The U.S. firm is receiving pounds from sales in Britain but wants dollars. Which of the following choices would best satisfy the desires of the firms?

• A) The British firm pays dollars to a swap dealer and receives pounds from the dealer. The U.S. firm pays pounds to the swap dealer and receives dollars.
• B) The U.S. firm pays dollars to a swap dealer and receives pounds from the dealer. The British firm pays pounds to the swap dealer and receives dollars.
• C) The British firm pays pounds to a swap dealer and receives pounds from the dealer. The U.S. firm pays dollars to the swap dealer and receives dollars.
• D) The British firm pays dollars to a swap dealer and receives dollars from the dealer. The U.S. firm pays pounds to the swap dealer and receives pounds.

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Definitions:

Hofstede

A cultural dimensions theory proposed by Geert Hofstede, which analyzes cultural differences through five primary dimensions: power distance, individualism versus collectivism, masculinity versus femininity, uncertainty avoidance, and long-term orientation.

High-power-distance Cultures

Societal or organizational cultures that tolerate a larger degree of inequality in the distribution of power and authority.

Monochronic Cultures

Cultures that value doing one task at a time, emphasizing schedules, punctuality, and a linear approach to organizing time.

Polychronic Cultures

Societies that value multitasking and the simultaneous handling of engagements over a focus on punctuality and schedules.