A service organization is considering expansion to Thailand or Ghana. An initial country risk analysis for each country must be conducted. What is Thailand's economic exposure? What is Ghana's economic exposure?© BrainMass Inc. brainmass.com October 16, 2018, 11:24 pm ad1c9bdddf
A service organization is considering expansion to Thailand or Ghana. An initial country risk analysis for each country must be conducted. What is Thailand's economic exposure? What is Ghana's economic exposure?
Economic exposure refers to the impact on the cash flows of a firm due to changes in exchange rate. The changes in exchange rate depend to a large extent on the policies of the country.
Let us first take ...
The solution explains the economic exposure of Thailand and Ghana.
Exchange Rate as Policy Tool; Foreign Currency; Economic Exposure vs. Transaction Exposure
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?
sell dollars for foreign currency.
buy dollars with foreign currency.
lower interest rates.
none of the above.
Which of the following is an example of economic exposure but not an example of transaction exposure?
An increase in the dollar's value hurts a U.S. firm's domestic sales because foreign competitors are able to increase their sales to U.S. customers.
An increase in the pound's value increases the U.S. firm's cost of British pound payables.
A decrease in the peso's value decreases a U.S. firm's dollar value of peso receivables.
A decrease in the Swiss franc's value decreases the dollar value of interest payments on a Swiss deposit sent to a U.S. firm by a Swiss bank.