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    Translation exposure, locational arbitrage

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    (40) In most cases, translated income gains and losses due to changes in foreign currency values are reported as _______ when using FASB-52.

    a) current net income
    b) revenues (for gains) or operating expenses (for losses)
    c) a component of stockholder's equity
    d) none of the above

    (13) Assume the following bid and ask rates of the pound for two banks as shown below:

    Bid Ask
    Bank C $1.61 $1.63
    Bank D $1.58 $1.60

    As locational arbitrage occurs:

    a) the bid rate for pounds at Bank C will increase; the ask rate for pounds at Bank D will increase.
    b) the bid rate for pounds at Bank C will increase; the ask rate for pounds at Bank D will decrease.
    c) the bid rate for pounds at Bank C will decrease; the ask rate for pounds at Bank D will decrease.
    d) the bid rate for pounds at Bank C will decrease; the ask rate for pounds at Bank D will increase.

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    Solution Preview

    (40) In most cases, translated income gains and losses due to changes in foreign currency values are reported as _______ when using FASB-52.

    a) current net income
    b) revenues (for gains) or operating expenses (for losses)
    c) a component of stockholder's equity
    d) none of the above

    Answer: c) a component of stockholder's equity

    Translation Gains or Losses are recorded in separate ...

    Solution Summary

    Answers 2 multiple choice questions on locational arbitrage, translation exposure.

    $2.19

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