If the European Subsidiary of a U

question 28

Multiple Choice

If the European subsidiary of a U.S. firm has net exposed assets of €750,000, and the euro drops in value from $1.30/euro to $1.20/€ the U.S. firm has a translation:

• A) gain of $75,000.
• B) loss of $75,000.
• C) gain of $625,000.
• D) loss of €576,923.

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Definitions:

Money Demand

The desired holding of financial assets in the form of money (cash and demand deposits) that can be easily exchanged for goods and services.

Money Supply

The aggregate amount of monetary assets available for use in an economy at a given time.

Aggregate Demand

The comprehensive requirement for products and services in an economic setting, valued at a certain price point during a specific timeframe.

Interest Rates

The cost of borrowing money, expressed as a percentage of the amount borrowed, paid to the lender over a specified period.