Answer to Question #184921 in Economics for Puja

Question

1.      You decided not to hedge BusBoard’s currency exposure. If the expected final sales volume is 2,500, what are your total revenues

a)  if the exchange rate (bid-ask) remains at $0.76/C$ - $0.78/C$? Let’s call this the baseline scenario.

b)  if the investors consider the Canadian dollar a safe haven currency during the pandemic? How does this compare to the baseline case?

c)  if the investors consider the U.S. dollar a safe haven currency during the pandemic? How does this compare to the baseline case?

Answer 1

1. If the expected final sales volume is 2,500, then your total revenues are:

a) if the exchange rate (bid-ask) remains at $0.76/C$ - $0.78/C$, then TR = 0.76×2,500 = $1,900.

b) if the investors consider the Canadian dollar a safe haven currency during the pandemic, then total revenue will decrease.

c) if the investors consider the U.S. dollar a safe haven currency during the pandemic, then the total revenue will increase.