Assume that you manage a firm that faces transaction exposure. Your company manufactures and sells...
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Assume that you manage a firm that faces transaction exposure. Your company manufactures and sells tricycles around the world. You just completed a large sale of tricycles to a chain of stores in Sweden and received a promised payment of 1,000 krona per tricycle. You have already sold 4,000 tricycles and are now awaiting payment which you expect to receive in 90 days. The exchange rate today is 7.3 krona per dollar. Over the next ninety days, the indirect exchange rate unexpectedly moves from 7.3 to 7.6. What is the fall in domestic revenue due to this unexpected move in the exchange rate?
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