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Mercury Co. has a subsidiary based in Italy and is exposed to translation exposure. Mercury forecasts that its earnings next year will be 10 million.
Mercury Co. has a subsidiary based in Italy and is exposed to translation exposure. Mercury forecasts that its earnings next year will be 10 million. Mercury decides to hedge the expected earnings by selling 10 million forward. During the next year, the euro appreciated. Mercury's consolidated earnings were ____ affected by the euro's movement, and Mercury's hedge position was ____ affected by the euro's movement.
a. | favorably; adversely |
b. | adversely; favorably |
c. | adversely; adversely |
d. | favorably; favorably |
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