You expect to receive revenues of USD 20,000 from your UK customers in one year....
60.1K
Verified Solution
Link Copied!
Question
Finance
You expect to receive revenues of USD 20,000 from your UK customers in one year. Although the revenues are denominated in USD, youve noticed they are sensitive to exchange rate movements.
In particular, youve observed that your revenues will increase by USD 400 if the British pound (GBP) appreciates against the USD by 0.10 (for example, if the exchange rate moves from 1.10 USD per GBP to 1.20 USD per GBP.
Informally, your revenues represent:
(Select one)
short exposure to the GBP
long exposure to the GBP
No foreign exchange exposure, since your revenues are denominated in USD
To hedge this exposure, you would use a
(Select one)
short GBP forward contract
long GBP forward contract
no hedge is necessary, since you have no foreign exchange exposure
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
