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If the net inflow of one currency is about the same amount as a net outflow in another currency, the firm will benefit if these two currencies are positively correlated because the transaction exposure is offset.

Assume the bid rate of an Australian dollar is $.60 while the ask rate is $.61 at Bank Q. Assume the bid rate of an Australian dollar is $.62 while the ask rate is $.625 at Bank V. Given this information, what would be your gain if you use $1,000,000 and execute locational arbitrage? That is, how much will you end up with over and above the $1,000,000 you started with?

Wisconsin Inc. conducts business in Zambia. Years ago, Wisconsin established a subsidiary in Zambia that has consistently generated very large profits denominated in Zambian kwacha. Wisconsin wishes to restructure its operations to reduce economic exposure. Which of the following is not a feasible way of accomplishing this?

To force the value of the pound to appreciate against the dollar, the Federal Reserve should:

When the real cost of hedging is positive, this implies that hedging was more favorable than not hedging.

FAI Corporation will be receiving 300,000 Canadian dollars (C$) in 90 days. Currently, a 90-day call option with an exercise price of $0.76 and a premium of $0.01 is available. Also, a 90-day put option with an exercise price of $0.74 and a premium of $0.01 is available. FAI plans to purchase options to hedge its receivable position. Assuming that the spot rate in 90 days is $0.71, what is the net amount received from the currency option hedge?

It has been argued that the exchange rate can be used as a policy tool. Assume that the U.S. government would like to reduce inflation. Which of the following is an appropriate action given this scenario?

The Tidewater Wars in Virginia

Yomance Co. is a U.S. company that has exposure to Japanese yen and British pounds. It has net inflows of 5,000,000 yen and net outflows of 60,000 pounds. The present exchange rate of the Japanese yen is $.012 while the present exchange rate of the British pound is $1.50. Yomance Co. has not hedged its positions. The yen and pound movements against the dollar are highly and positively correlated. If the dollar weakens, then Yomance Co. will:

Name the tissue type marked by the green dot.