Assume You Manage a Firm That Faces Transaction Exposure

question 67

Multiple Choice

Assume you manage a firm that faces transaction exposure.Your company manufactures and sells tricycles around the world.You have just completed a large sale of tricycles to a chain of stores in Sweden and received a promised payment of 375 krona per tricycle.You have already sold 3,000 tricycles and are now awaiting payment which you expect to receive in 90 days.The exchange rate today is 7.5 krona per dollar.Over the next ninety days,the indirect exchange rate unexpectedly moves from 7.5 to 7.7.What is the fall in domestic revenue due to this unexpected move in the exchange rate?

• A)$389
• B)$1289
• C)$2896
• D)$3896

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Definitions:

Margin of Error

An expression of the amount of random sampling error in a survey's results, often used to create confidence intervals around a sample statistic.

Binomial Proportion

A statistical measure that represents the proportion of successes in a series of independent trials in a binomial distribution.

Margin of Error

An expression of the amount of random sampling error in survey results, indicating the range within which the true population parameter is expected to fall.

Margin of Error

The margin of error is a statistic expressing the amount of random sampling error in a survey's results, indicating the range within which the true value lies with a certain level of confidence.