Keller & Linstead Inc. specialize in importing tropical fruit (mainly bananas). Keller & Linstead buy high-end, top-quality tropical fruit in South America and sell it to Kroger in Cincinnati. The Northern Kentucky-based company is thinking about buying a fruit processing plant in Brazil. Which of the following statements is true?

Both statements are correct.

A current appreciation of the Brazilian Real (BRL) would make the future acquisition of the processing plant more expensive in USD terms. However, this is offset by Keller & Linsteads positive (long) FX operating exposure to the BRL due to their fruit import activities.

Both statements are wrong.

If Keller & Linstead expect an appreciation in the value of the BRL, they should hedge their negative (short) FX operating exposure to the BRL. This would also help the company with their future acquisition of the processing plant.