Assume You Manage a Firm That Faces Transaction Exposure

question 26

Multiple Choice

Assume you manage a firm that faces transaction exposure.Your company manufactures and sells automobile parts around the world.You have just completed a large sale of parts to an auto manufacturer in France and received a promised payment of €172 per part.You have already sold 17,000 parts and are now awaiting payment which you expect 90 days from today.The exchange rate today is $1.25/€.Over the next ninety days,the direct exchange rate unexpectedly moves from $1.25/€ to $1.30/€.What is the gain in domestic revenue due to this unexpected move in the exchange rate?

• A)$106,000
• B)$114,900
• C)$118,500
• D)$146,200

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Definitions:

Sample Sizes

The number of observations or data points from the population used to make estimations about the population.

Critical Value Z

A threshold value on the standard normal distribution used in hypothesis testing to decide whether to reject the null hypothesis.

Test Statistic

A value calculated from sample data during a hypothesis test. It is used to decide whether to reject the null hypothesis.

Critical Value(s)

The threshold values used in hypothesis testing to determine whether to reject the null hypothesis, based on the chosen significance level.