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Duke Inc. is a U.S. producer of spicy cheese products. Dukes balance sheet has USD...

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Finance

Duke Inc. is a U.S. producer of spicy cheese products. Dukes balance sheet has USD 200 million in equity, USD 20 million in USD-denominated net debt, and USD 40 million in EUR-denominated net debt. Dukes business exposure to the EUR is:1.20. Which of the following statements is correct? S1: Duke Inc. could lower its natural long FX exposure to the EUR by entering a long EUR FX forward contract S2: Duke Inc. could lower its FX exposure by adopting a FX pass-through policy, which would allow Duke to increase the sales price in the Euro-zone when the EUR depreciates against the USD and vice versa.

S2 is correct but S1 is false

Both statements are correct

S1 is correct and S2 is false

Both statements are false

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