Question Details

Would you describe the exposure of the Sports Exports Company 



1. Would you describe the exposure of the Sports Exports Company to exchange rate risk as
transaction exposure? Economic exposure? Translation exposure?

2. Jim Logan is considering a change in the pricing policy in which the importer must pay in dollars,
so that Jim will not have to worry about converting pounds to dollars every month. If
implemented, would this policy eliminate the transaction exposure of the Sports Exports
Company? Would it eliminate Sports Exports’ economic exposure? Explain.

3. If Jim decides to implement the policy described in the previous question, how would the Sports
Exports Company be affected (if at all) by appreciation of the pound? By depreciation of the
pound? Would these effects on Sports Exports differ if Jim retained his original policy of pricing
the exports in British pounds?




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