A US Firm Has £50 Million in Assets in Britain That

question 39

Multiple Choice

A U.S. firm has £50 million in assets in Britain that they need to repatriate in six months. They could hedge the exchange rate risk by

• A)buying pounds forward.
• B)selling pounds forward.
• C)borrowing pounds.
• D)both selling pounds forward and borrowing pounds.
• E)both buying pounds forward and borrowing pounds.

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Definitions:

Automobile Manufacturing

The industry and process involved in designing, producing, marketing, and selling motor vehicles.

Ford Motor Company

An American multinational automaker founded by Henry Ford, known for revolutionizing the automobile industry.

Constant Returns to Scale

A condition where increasing all inputs by the same proportion results in an increase in output by that same proportion.

Minimum Efficient Scale

The smallest level of production at which long-run total average costs are minimized.