Assume that you manage a firm that faces transaction exposure. Your company manufactures and sells tricycles around the world
You just completed a large sale of tricycles to a chain of stores in Sweden and received a promised payment of 1,000 krona per tricycle. You have already sold 3,000 tricycles and are now awaiting payment. The exchange rate today is 7 krona per dollar. What will be your sales receipt in krona, and what amount of dollars will these kronas convert to at today's exchange rate?
A) 2,000,000 kronas and about 428,571 dollars
B) 3,000,000 kronas and about 300,000 dollars
C) 3,000,000 kronas and about 428,571 dollars
D) 2,000,000 kronas and about 300,000 dollars
Answer: C
Explanation: C) 3,000 tricycles at 1,000 krona per tricycle = 3,000,000 kronas is your sales receipt. At today's exchange rate, these kronas will convert to = $428,571.43.
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