Question
A U.S. company is planning to purchase an Australian gold mining company through foreign direct investment (FDI). The U.S. company expects to pay in AUD
A U.S. company is planning to purchase an Australian gold mining company through foreign direct investment (FDI). The U.S. company expects to pay in AUD one year from now. The Australian gold mining company expects to receive a payment in USD one year from now from a major client for a gold shipment. Which of the following statements is correct?
S1: The U.S. company is exposed to the USD/AUD exchange rate and would benefit from a strengthening of the USD against the AUD.
S2: The Australian gold mining company is exposed to the USD/AUD exchange rate and would benefit from a strengthening of the AUD against the USD.
S1 is correct and S2 is false
Both statements are correct
Both statements are false
S2 is correct but S1 is false
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