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A U.S. insurance company invests $1,000,000 in a private placement of British bonds. Each bond pays £300 in interest per year for 20 years. If the current exchange rate is £0.874/$, what is the nature of the insurance company’s exchange rate risk (net long or net short)? Specifically, what type of exchange rate movement concerns this insurance company (are they exposed to an appreciation or depreciation of the pound)?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92801196

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