I know the answers I just don\'t the rules for these particulars set of question

Question

I know the answers I just don't the rules for these particulars set of questions

2. If the price of British Pounds goes from 51.85/Pound to 51 35/Pound, then the net cash flows (protit) of a SA haed fibh pimona s SA based firm which primarily imports its raw material from England will AJincreased B. decreased C. not changed much 3. If the price of Euro goes from $1.45/Euro to $1 60/Euro, then during this period, the exports of a US based firm which primarily sells its product in Europe will: A. increased B. decreased C. not changed much 4. Assume that Chrysler, a US based firm is purely domestic -with no imports or exports - is also competing with Japanese auto companies. If during a given period of time, the US dollar strengthens against Japanese yen, This will cause the net cash flow Chrysler to: A. increased B. decreased C. not changed much

Explanation / Answer

1. See, in first case the to buy 1 pound you need to pay $1.85 right now, but if the prices go down then you need to pay $1.35 to pay 1 pound. Since company is importing raw materials from Europe it has to pay the supplier in pound. hence less dollars.

2. Use the same logic as of question number 1, as price of 1 euro has gone up from $1.45 to $1.60, hence company when it will recieve Euros will be able to get to more number of dollars.

3. Since company has nothing to do with imports or exports hence no effect on its cash flows.

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