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International Finance

11. Lyle Shipping, a British company, has chartered out ships at fixed-U.S.-dollar freight rates. How can Lyle use financing to hedge against its exposure? How will your recommendation affect Lyle's translation exposure? Lyle uses the current rate method to translate foreign currency assets and liabilities. However, the charters are off balance sheet items.

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ANSWER. Since Lyle has chartered out its ships in dollars, it has fixed dollar revenues. By financing its ship purchases with dollars, Lyle can offset these contractual dollar inflows with contractual dollar outflows.

Accountants will note that ...

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