Sports Incorporated is a U.S. company that sells sporting equipment to companies around the world. On July 1, it received a $50,000 order from Decathlon, a French company, to be delivered immediately but to be paid in euros on August 15. The selling price in euros is calculated using the exchange rate in effect on July 1. The July 1 spot rate of U.S. dollars for euros is $1 = 0.95. The August 15 spot rate of U.S. dollars for euros is $1 = 0.87. On August 15, how much does Sports Incorporated actually receive in euros from Decathlon, and how much is this converted to U.S. dollars?

a.47,500 and $54,597.70

b.50,000 and $47,500

c.47,500 and $50,000

d.47,500 and $47,500

Sports Incorporated (SI) is a U.S. company that buys components from a Scottish manufacturer for use in manufacturing sporting equipment. The Scottish manufacturer requires payment in pound sterling (). SI sells the finished sporting equipment to European companies that, in turn, pay SI in euros (). On July 1, SI ordered components from the Scottish company costing 160,500 and sold finished sporting equipment to a French company with a selling price of $200,000 to be paid in euros. The July 1 spot rates of U.S. dollars for pounds and for euros are $1 = 107.0 and $1 = 0.95. How many euros will SI receive from the French company in payment for the finished equipment?

a.210,526.32

b.21,400,000

c.190,000

d.200,000

Mason, Inc., is a multinational company doing business in Europe and Asia. Recently, Mason's controller, Mr. Andrews, has become concerned about currency depreciation and exchange losses in Asia. Mr. Andrews enters into a hedging arrangement to lock in the exchange rate for future cash needs in advance. This strategy helps him manage which type of risk?

a.economic risk

b.accounting risk

c.translation risk

d.transaction risk

Foreign trade zones are physically located abroad, outside the geographic boundaries of the United States, but are considered to be inside U.S. commerce for trade purposes.

True

False