CHAPTER 10 QUIZ 21

 CHAPTER  10 QUIZ 21
Transaction Exposure. Vegas Corp. is a U.S. firm that exports most of its products to Canada. It
historically invoiced its products in Canadian dollars to accommodate the importers. However, it
was adversely affected when the Canadian dollar weakened against the U.S. dollar. Since Vegas
did not hedge, its Canadian dollar receivables were converted into a relatively small amount of
U.S. dollars. After a few more years of continual concern about possible exchange rate
movements, Vegas called its customers and requested that they pay for future orders with U.S.
dollars instead of Canadian dollars. At this time, the Canadian dollar was valued at $.81. The
customers decided to oblige, since the number of Canadian dollars to be converted into U.S.
dollars when importing the goods from Vegas was still slightly smaller than the number of
Canadian dollars that would be needed to buy the product from a Canadian manufacturer. Based
on this situation, has transaction exposure changed for Vegas Corp.? Has economic exposure
changed? Explain.

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