Question Assume the exchange rate for the Mexican Peso is falling relative to the U.S. dollar....

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Answer 1

Answer #1

Answer: Option [d] -- Credit sales to Mexican companies at prices stated in Mexican Pesos.

Explanation:

If the prices are denoted in $, there would be no exchange rate risk. Hence, options b & c are not affected by exchange rate changes.

When exchange rate of Mexican Peso falls (Peso depreciates) in relation to $, it means that more Pesos are needed for conversion to dollars or fewer dollars are received on conversion.

Hence, credit sales denominated in Pesos, will bring losses.

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Answer 2

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Question Assume the exchange rate for the Mexican Peso is falling relative to the U.S. dollar....

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