Mercury Co

question 24

Multiple Choice

Mercury Co. has a subsidiary based in Italy and is exposed to translation exposure. Mercury forecasts that its earnings next year will be €10 million. Mercury decides to hedge the expected earnings by selling €10 million forward. During the next year, the euro appreciated. Mercury's consolidated earnings were ____ affected by the euro's movement, and Mercury's hedge position was ____ affected by the euro's movement.

• A) favorably; favorably
• B) favorably; adversely
• C) adversely; favorably
• D) adversely; adversely

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Definitions:

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