Reese Co. will pay 1 million British pounds for materials imported from the United Kingdom in one month. Reese Co. sells some goods to Poland and will receive 3 million zloty (the Polish currency) for those goods in one month. The spot rate of the pound is $1.50, while the spot rate of the zloty is about $0.40. Assume that the pound and zloty are both expected to depreciate substantially against the dollar over the next month and by the same degree (percentage). Will this have a favorable effect, unfavorable effect, or no effect on Reese Co. over the next year?

The dollar value of the outflow exposure to pounds is ___1___ the inflow exposure to zloty. If both currencies depreciate, Reese Co.___2___because the ___3___ effect on the outflows should be___4___ the ___5___ effect on the inflows.

1: Greater than, lower than or equal to

2: Will benefit, will loss or will not be affected

3: Favorable or unfavorable

4: Greater than, lower than or equal to

5: Favorable or unfavorable