1. Electrolux transaction exposure (beginner). The Swedish manufacturer of home appliances exports €175 million of vacuum cleaners every month to Carrefour, the French retailer. Payment is due at the end of each month. Electrolux also imports monthly small electrical motors from Italian manufacturer Finmeca in the amount of €50 million due at the end of each quarter. Electrolux pays a quarterly interest of €35 million on its €-denominated outstanding commercial paper on March 30, June 30, September 30, and December 31 and a balloon principal repayment of €250 million on March 31 and September 30 of each year.

a. Show Electrolux’s net monthly € transaction exposure for a typical year.

b. Electrolux decides on January 1 of this year to swap its €-denominated commercial paper into Swiss franc–denominated commercial paper. How would its € transaction exposure be impacted?