ABC Co. is a U.S. company that has exposure to Japanese yen and British pounds....
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ABC Co. is a U.S. company that has exposure to Japanese yen and British pounds. It has net inflows of 4,000,000 yen and net outflows of 50,000 pounds. The present exchange rate of the Japanese yen is $.010 while the present exchange rate of the British pound is $1.45. ABC Co. has not hedged its positions. The yen and pound movements against the dollar are highly and positively correlated. If the dollar strengthens, then ABC Co. will :
| be adversely affected, because the dollar value of its yen position exceeds the dollar value of its pound position | ||
| benefit, because the dollar value of its pound position exceeds the dollar value of its yen position. | ||
| benefit, because the dollar value of its yen position exceeds the dollar value of its pound position. | ||
| be adversely affected, because the dollar value of its pound position exceeds the dollar value of its yen position. |
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