Week 6 Homework
Chapter 10: Please Do: Questions and Applications-
#4.) Currency CorrelationsKopetsky Co. has net receivables in several currencies that are highly correlated with each other.
What does this imply about the firm’s overall degree of transaction exposure? Are currency correlations perfectly stable over time?
What does your answer imply about Kopetsky Co. or any other firm using past data on correlations as an indicator for the future?
#11.)Transaction ExposureAggie Co. produces chemicals. It is a major exporter to Europe, where its main competition is from other U.S. exporters.
All of these companies invoice the products in U.S. dollars. IsAggie’s transaction exposure likely to be significantly affected if the euro strengthens or weakens? Explain.
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