10. Golden Company does business with other companies in different countries. Due to

its nature of internationalization, Golden is exposed to exchange rate risk. Which of

the following statements about the economic exposure is incorrect?

A. There will be an economic gain if Golden has net cash outflows of a foreign currency and the foreign currency weakens in relation to domestic currency

B. There will be an economic loss if Golden has net cash inflows of a foreign currency and the foreign currency strengthens in relation to the domestic currency.

C. There will be an economic loss if Golden has net cash outflows of a foreign currency and the foreign currency strengthens in relation to the domestic currency

D. There will be an economic loss if Golden has net cash inflows of a foreign currency and the foreign currency weakens in relation to the domestic currency

11. Golden Company is owed from a Mexican company 800,000 pesos due in 60 days.

Golden thinks that the peso may weaken relative to the U.S. dollar shortly. Which of

the following actions may Golden take to mitigate this risk?

A. There is no way for Golden to mitigate this risk

B. Purchase 800,000 peso in the market immediately

C. Enter into a forward contract to sell 800,000 pesos in 60 days

D. Enter into an interest rate swap agreement for two months

12. The main business of Golden Company is to export to different countries. Which of the following statements about Goldens risk exposures is correct?

A. Golden may be subject to translation, economic, and transaction exposures to currency risk

B. Golden may be subject to transaction and economic exposures to exchange rate risk

C. Golden may be subject to translation and transaction exposures to exchange rate risk

D. Universal may only be subject to economic exposures to exchange rate risk