Answered: ective measures need to be developed to…

ective measures need to be developed to counteract the transaction exposure. In line with the above, discuss the various strategies which firms can use to minimize their transaction exposure.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter14: Money And The Federal Reserve System

Section: Chapter Questions

Problem 5SQ

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Question

Foreign currency denominated transaction creates a transaction exposure for the company. Adverse movements in exchange rates between the transaction time and the settlement time can either reduce the cash inflows or increase the cash outflows for a firm. As such, protective measures need to be developed to counteract the transaction exposure.

In line with the above, discuss the various strategies which firms can use to minimize their transaction exposure.

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