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Imagine that you have just been appointed treasurer of a consumer goods company. It manufactures only in the United Kingdom, but exports over 50 per cent of its sales. As the market is an international one, you face the same competitors in each national market, including your domestic market. Your major competitors are Japanese and German.

(a) How does your foreign exchange exposure arise?

(b) How would you measure it?

(c) Could your exposure be reduced by investing in manufacturing facilities abroad? (Association of Corporate Treasurers: Part II, September 1985, Paper in Currency Management)

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