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19. A company based in the United States sells $50.000 of merchandise to a company in Great Britain; purchase terms require the British company to
19. A company based in the United States sells $50.000 of merchandise to a company in Great Britain; purchase terms require the British company to pay 20,000 in three months. At the same time, the United States company enters into a contract with its bank to sell 20,000 forward for dollars in three months. The net effect of the two transactions is that (A) the revenues for the merchandise sale will be fixed in dollars three months hence ! (B) a speculative position will be created in which the United States company will profit if the dollar appreciates versus the British pound over the next three months (C) the payment for the British company will be fixed at $60,000 (D) the profits on the sale of the merchandise will be tied to the exchange rate of dollars for British pounds 19. A company based in the United States sells $50.000 of merchandise to a company in Great Britain; purchase terms require the British company to pay 20,000 in three months. At the same time, the United States company enters into a contract with its bank to sell 20,000 forward for dollars in three months. The net effect of the two transactions is that (A) the revenues for the merchandise sale will be fixed in dollars three months hence ! (B) a speculative position will be created in which the United States company will profit if the dollar appreciates versus the British pound over the next three months (C) the payment for the British company will be fixed at $60,000 (D) the profits on the sale of the merchandise will be tied to the exchange rate of dollars for British pounds
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