Q11-10 - Q11-10 An exposed net asset position occurs when a...

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Q11-10 An exposed net asset position occurs when a company's trade receivables and other assets denominated in a foreign currency are greater than its liabilities denominated in that currency. An exposed net liability position occurs if a company's liabilities denominated in a foreign currency exceed receivables denominated in that currency.
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Q11-11 A difference usually exists between a currency's spot rate and forward rate because of the different economic factors involved in the determination of a future versus present rate of exchange. This difference is usually positive because of uncertainty and conservatism toward the future. For example, if inflation is assumed to continue into the future in the foreign country whose currency is being acquired, the forward rate will be higher than the spot rate because of the decreasing purchasing power of the currency. In addition, the time value of money factor will typically result in a higher forward exchange rate than the spot exchange rate. Q11-12
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This note was uploaded on 10/22/2008 for the course ACC 440 taught by Professor Henderson during the Summer '08 term at University of Phoenix.

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Q11-10 - Q11-10 An exposed net asset position occurs when a...

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