Exchange rate- Exchange rate means the rate at which one currency can be exchanged with another currency.
To Explain:The impact of strengthening of local currency on exporters.
Answer to Problem 1UTI
When US Dollar is expected to strengthen in comparison to foreign currencies, the exporters will have a disadvantage because the demand of their products in the foreign market will decline asimporters of these productswill need to shell out more of their local currency for purchase of same $ value of product.
Explanation of Solution
The above statement can be explained with the help of following example. Say, a product cost is USD 10,000. The current exchange rate for Foreign Currency (FC) is 1 USD=4 FC. So, the cost to the importer would be
Thus, the impact currencies have been computed.
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- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning