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A London based firm has a subsidiary located in New York. The subsidiary has $1,000 in assets and $750 in liabilities. The current spot rate is $1.60/£.
-What is the U.S. firm's net exposure?
A) $250
B) $750
C) $1,000
D) $1,750
E) Cannot be determined.

Question

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A London based firm has a subsidiary located in New York. The subsidiary has $1,000 in assets and $750 in liabilities. The current spot rate is $1.60/£.
-What is the U.S. firm's net exposure?
A) $250
B) $750
C) $1,000
D) $1,750
E) Cannot be determined.

Quizplus · Accepted Answer

The U.S. firm's net exposure can be calculated as assets minus liabilities, which is $1,000 - $750 = $250.

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