King’s Bank, a British company, purchases market research services from Harris Interactive, a U.S. company, for a contract price to be paid in U.S. dollars when the report is delivered three months later. How would King’s Bank like to see the exchange rate move, assuming it isn’t hedging the transaction.
A. It hopes that the U.S. dollar appreciates in value against the British pound.
B. It hopes that the British pound appreciates in value against the U.S. dollar.
C. It makes no difference, since they are the customer and the sale takes place in the K.
D. It hopes that there is no change between the spot rate and the forward rate.
Answer:B
King’s Bank, a British company, purchases market research services from Harris Interactive, a U.S. company, for a contract price to be paid in U.S. dollars when the report is delivered three months later. How would King’s Bank like to see the exchange rate move, assuming it isn’t hedging the transaction.
A. It hopes that the U.S. dollar appreciates in value against the British pound. B. It hopes that the British pound appreciates in value against the U.S. dollar. C. It makes no difference, since they are the customer and the sale takes place in the K. D. It hopes that there is no change between the spot rate and the forward rate.