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An American MNE, US Standard, sells industrial equipment to a buyer in Germany for 2 million euro (EUR), with payments to be made in 90

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An American MNE, US Standard, sells industrial equipment to a buyer in Germany for 2 million euro (EUR), with payments to be made in 90 days. The spot exchange rate on the sale date is USD1.2/EUR. (a) Due to this transaction, what kind of risk does US Standard expose to? (4 marks) (b) Discuss how US Standard can hedge the above risk by using (i) money market contracts and (ii) options market contracts. (16 marks)

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