CHAPTER 10 QUIZ 19

CHAPTER 10 QUIZ 19
Comparing Transaction and Economic Exposure. Erie Co. has most of its business in the U.S.,
except that it exports to Belgium. Its exports were invoiced in euros (Belgium- currency) last
year. It has no other economic exposure to exchange rate risk. Its main competition when selling
to Belgium- customers is a company in Belgium that sells similar products, denominated in euros.
Starting today, Erie Co. plans to adjust its pricing strategy to invoice its exports in U.S. dollars
instead of euros. Based on the new strategy, will Erie Co. be subject to economic exposure to
exchange rate risk in the future? Briefly explain.

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