Exchange Rate Assignment | Homework For You
Firm “M” is a U.S. company that has exposure to the Swiss francs (SF) and Danish kroner (DK). It has net outflows of SF200 million and net inflows of DK500 million. The present exchange rate of the SF is about $.40 while the present exchange rate of the DK is $.20. Firm “M” has not hedged these positions. The SF and DK are highly correlated in their movements against the dollar. If the dollar weakens:
a)firm “M” will benefit, because the dollar value of its SF position exceeds the dollar value of its DK position
b)firm “M” will benefit, because the dollar value of its DK position exceeds the dollar value of its SF position.
c)firm “M” will be adversely affected, because the dollar value of its SF position exceeds the dollar value of its DK position.
d)firm “M” will be adversely affected, because the dollar value of its DK position exceeds the dollar value of its SF position. Get Finance homework help today