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    Affect of transactions on present and future exchange rates

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    Describe how these three typical transactions should affect present and future exchange rates.

    a. Seagram imports a year's supply of French champagne. Payment in French francs is due immediately.

    b. American Motors sells a new stock issue to Renault, the French car manufacturer. Payment in dollars is due immediately.

    c. Korean Airlines buys five Boeing 747s. As part of the deal, Boeing arranges a loan to KAL for the purchase amount from the U.S. Export Import Bank. The loan is to be paid back over the next seven years with a two year grace period.

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    Solution Preview

    Describe how these three typical transactions should affect present and future exchange rates.

    a. Seagram imports a year's supply of French champagne. Payment in French francs is due immediately.

    The French franc should appreciate relative to the dollar since demand for francs is ...

    Solution Summary

    The solution explains how three typical transactions should affect present and future exchange rates.

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