If a British company exports to a German company and the export is denominated in euros,which of the following is true?
A) The German company would experience a loss if the euro strengthens against the pound.
B) The British company would experience a gain if the euro strengthens against the pound.
C) The British company would not experience a gain or a loss because the sale is denominated in euros, not pounds.
D) Exports result in translation exposures but not transaction exposures.

Question

Quizplus · Accepted Answer

If the euro strengthens against the pound, then the value of the euros received by the British company would increase when converted back to pounds, resulting in a gain for the British company. For the German company, there would be no impact on the sale as the export is denominated in euros, not pounds.

If a British Company Exports to a German Company and the Export