When a U.S.-based company has a payable denominated in a foreign currency, the U.S. company wants the foreign currency to ________ and the U.S. dollar to ________.
A)strengthen; strengthen
B)strengthen; weaken
C)weaken; strengthen
D)weaken; weaken

Question

Quizplus · Accepted Answer

When a U.S.-based company has a payable in a foreign currency, it benefits if the foreign currency weakens (decreases in value) because it will cost less in U.S. dollars to settle the payable. Simultaneously, if the U.S. dollar strengthens, it further reduces the cost of settling the foreign currency payable.

When a US-Based Company Has a Payable Denominated in a Foreign Currency