A South Korean company imports from the U.S. and pays in U.S. dollars. The spot

Question

A South Korean company imports from the U.S. and pays in U.S. dollars. The spot exchange rate is $/1054won and the forward rate is the same. The South Korean company expects the U.S. dollar to appreciate against the won. The South Korean company could protect its position by:
entering into a hedge buying dollars forward
entering into a hedge selling dollars forward
entering into locational arbitrage
entering into triangular arbitrage
none of the above

The inflation rate is expected to rise substantially in Argentina while U.S. inflation remains unchanged. With respect to the U.S. dollar, this would:
place either upward or downward pressure on the Argentine real (depending on degree of increase in Argentine inflation)
place upward pressure on the Argentine peso
place downward pressure on the Argentine peso
place downward pressure on the U.S. dollar
none of the above

A U.S. company purchases materials from a company in Brazil for 1 million reals. It receives revenues from Brazil of 2 million reals. The U.S. company would:
be unaffected by a stronger dollar
be unaffected by a weaker dollar
benefit from a stronger dollar
benefit from a weaker dollar
none of the above

Explanation / Answer

1. entering into a hedge selling dollars forward

2. place downward pressure on the Argentine peso

3. be unaffected by a stronger dollar

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.