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- Your company located in the US imports raw materials from Europe. If the European Central Bank announces to lower the Euro exchange rate, what impact do you expect to see in your business? A. Your company will pay higher US dollar costs to import from Europe. B. Your company will pay lower US dollar costs to import from Europe. C. The Euro exchange rate doesn't have any impact on your company. D. It should reduce your competitiveness in your home market.Recently the British Pound suffered an unexpected depreciation in value. Which of the following actions being considered by Coventry Furniture of London, a purely domestic furniture manufacturer and retailer (based in the UK), would be considered a highly unlikely response to the depreciation of the pound? Coventry might try to raise domestic prices because competing imports are now priced higher in England. Coventry might try to lower domestic prices because competing imports are now priced lower in England. Coventry might choose to maintain its domestic sales prices constant in pound terms. None of these actions are a highly unlikely response.The pressures on the foreign exchange market are such that they cause the British pound to depreciate against the US dollar. If the British pound tries to maintain the exchange rate against the US dollar, which of the following pressures will stop the pressure to devalue the British pound? a. Britain has to sell pounds to buy dollarsb. Britain will have to increase its money supply to create a domestic product c. Britain must buy pounds and sell dollarsd. Britain should do nothing as a fixed interest rate does not change
- If a U.S.-based MNC focused completely on exporting, then its valuation would likely be adversely affected if most currencies were expected to appreciate against the dollar over time. Group of answer choices True FalseMicrosoft is contemplating a change in its overseas pricing policy. Currently it is pricing its international sales in foreign currency. The price elasticity for Microsoft products is estimated to be 0.5. Would Microsoft be better off pricing in foreign currency? Explain.An exporter is trying to reduce transaction exposure in the face of a depreciating foreign currency, which of the following strategies would be best? A) Paying or collecting early B) Paying or collecting late C) Paying bate, collecting early. D) Paying early, collecting late
- In the following cases, state which type of exchange rate risk the company is facing and wheter this risk is beneficial or harmful in nature. A British power-generating company imports coal from Germany, paying for the coal in euros. The company expects the pound to weaken against the euro over the next year. A UK toy company supplies only the domestic market. Its only major competitor in this market if a US toy company. The pound is expected to weaken against the dollar over the next year. A UK company has bought a factory in France, financing the purchase with a sterling borrowing. Over the next year the pound is expected to appreciate against the euro.The Euro increased dramatically in value against the U.S. dollar between 2000 and 2009. The result has been that A. U.S. travelers are finding it less expensive to travel in Europe. B. European exports to the United States are more competitive. C. U.S. exports are more competitive in Europe. D. U.S. goods cost more in Europe.Recently the US Dollar has been gaining strength against the EURO. This is good news for US companies that export items to Europe and are paid in EUROS. O True O False
- General Motors exports cars to Spain but the strong dollar against the euro hurts sales of GM cars in Spain. In the Spanish market, GM faces competition from the Italian and French car makers, such as Fiat and Renault, whose operating currencies are the euro. What kind of measures would you recommend so that GM can maintain its market share in Spain?If the U.S. dollar were to appreciate substantially, what steps could a domestic manufacturer such as Cummins Engine Co. of Columbus, Indiana, take in advance to reduce the effect of the exchange rate fluctuation on company profitability?One major risk of engaging in global trade is that as national economies continue to integrate, an economic meltdown in one part of the world can have far-reaching impact. True False